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Scenarios for the Sustainable Financing of the State Pension System

Author

Listed:
  • Axel Börsch-Supan
  • Tabea Bucher-Koenen
  • Johannes Rausch

Abstract

Axel Börsch-Supan, Tabea Bucher-Koenen and Johannes Rausch, MEA – Munich Center for the Economics of Aging at the Max-Planck-Institut für Sozialrecht und Sozialpolitik, Munich, show that the position of the state pension system through 2030, the timeframe of the latest pension insurance report, is stable in terms of the markers set out in §154 Volume VI of the Social Code. As legislation currently stands, however, the contribution rate will exceed the 22% marker as of 2031 and the net pre-tax pension level will fall short of the 43% ceiling as of 2036. Fixing the net pension level at 46% (50%) would give rise to annual additional costs of around 17.5 (38) billion euros and would raise the contribution rate in 2040 to over 24% (26%). An automatic adjustment of age-related parameters of the state pension scheme to life expectancy rates, by contrast, could maintain the pension level sustainably higher than 43% without an increase in the contribution rate of over 23%. Following this line of thought, there is not only no financial scope for expanding social benefits, but on the contrary, it remains necessary to implement reforms in order to ensure the long-term financial sustainability of the state pension system.

Suggested Citation

  • Axel Börsch-Supan & Tabea Bucher-Koenen & Johannes Rausch, 2016. "Scenarios for the Sustainable Financing of the State Pension System," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 69(18), pages 31-40, September.
    • Handle: RePEc:ces:ifosdt:v:69:y:2016:i:18:p:31-40
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    References listed on IDEAS

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    1. Bettina Lamla & Martin Gasche, 2013. "Erwarteter Bezug von Grundsicherung im Alter: Verhaltensunterschiede und Fehleinschätzungen," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 133(4), pages 539-562.
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    Cited by:

    1. Axel Börsch-Supan & Johannes Rausch, 2018. "Die Kosten der doppelten Haltelinie," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 71(09), pages 23-30, May.
    2. Börsch-Supan, Axel & Rausch, Johannes, 2018. "Die Kosten der doppelten Haltelinie," MEA discussion paper series 201803, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    3. Schön, Matthias, 2020. "Long-term outlook for the German statutory pension system," Discussion Papers 22/2020, Deutsche Bundesbank.
    4. Fenge, Robert & Peglow, François, 2018. "Decomposition of demographic effects on the german pension system," The Journal of the Economics of Ageing, Elsevier, vol. 12(C), pages 61-76.
    5. Börsch-Supan, Axel & Bucher-Koenen, Tabea & Goll, Nicolas & Maier, Christina, 2016. "15 Jahre Riester - eine Bilanz," Working Papers 12/2016, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
    6. Matthias Schön, 2023. "Demographic change and the rate of return in pay-as-you-go pension systems," Journal of Population Economics, Springer;European Society for Population Economics, vol. 36(3), pages 1799-1827, July.

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    More about this item

    JEL classification:

    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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