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Will it Last? An Assessment of the 2001 German Pension Reform

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  • Bonin, Holger

    ()
    (ZEW Mannheim)

Abstract

In May 2001, Germany adopted a fundamental pension reform cutting back public pensions and introducing personal pension accounts. The paper critically reviews the reform decisions and evaluates their long-term viability. It is shown that the adjustment of the Public Pension Scheme misses the proclaimed contribution rate and replacement ratio targets already under moderate economic conditions. However, the new private pension plans provide scope for further downsizing state pensions, necessary beyond 2025. As the enacted savings rate target is conservative, individual pensions keep retirement income sufficient even if returns to pension funds are low due to legal restrictions on savings vehicles.

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File URL: http://ftp.iza.org/dp343.pdf
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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 343.

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Length: 37 pages
Date of creation: Aug 2001
Date of revision:
Publication status: published in: Geneva Papers on Risk and Insurance, 2002, 24 (4), 547-564
Handle: RePEc:iza:izadps:dp343

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Keywords: pension funding; Germany; Pension reform; fiscal projections;

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References

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  1. Sinn, Hans-Werner, 1999. "Gesetzliche Rentenversicherung: Prognosen im Vergleich," Munich Reprints in Economics 19871, University of Munich, Department of Economics.
  2. Alan J. Auerbach & Jagadeesh Gokhale & Laurence J. Kotlikoff, 1994. "Generational Accounting: A Meaningful Way to Evaluate Fiscal Policy," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 73-94, Winter.
  3. Alan J. Auerbach & Jagadeesh Gokhale & Laurence J. Kotlikoff, 1991. "Generational Accounts - A Meaningful Alternative to Deficit Accounting," NBER Working Papers 3589, National Bureau of Economic Research, Inc.
  4. Hans-Werner Sinn, 1997. "The Value of Children and Immigrants in a Pay-As-You-Go Pension System: A Proposal for a Partial Transition to a Funded System," NBER Working Papers 6229, National Bureau of Economic Research, Inc.
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Cited by:
  1. Peter Kesting, 2010. "Why it is possible that wages and pensions can increase simultaneously in an ageing and stagnating % A theoretical investigation and a simulation of the German case," Applied Economics, Taylor & Francis Journals, vol. 42(6), pages 727-738.
  2. Christoph Borgmann & Matthias Heidler, 2003. "Demographics and Volatile Social Security Wealth: Political Risks of Benefit Rule Changes in Germany," CESifo Working Paper Series 1021, CESifo Group Munich.
  3. Jokisch, Sabine & Halder, Gitte & Fehr, Hans, 2004. "A Simulation Model for the Demographic Transition in Germany : Data Requirements, Model Structure and Calibration," W.E.P. - Würzburg Economic Papers 48, University of Würzburg, Chair for Monetary Policy and International Economics.
  4. Axel Börsch-Supan & Anette Reil-Held & Christina Benita Wilke, 2003. "Der Nachhaltigkeitsfaktor und andere Formelmodifikationen zur langfristigen Stabilisierung des Beitragssatzes zur GRV," MEA discussion paper series 03030, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
  5. Joachim Winter, 2002. "The impact of pension reforms and demography on stock markets," MEA discussion paper series 02021, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
  6. Tim Krieger & Christoph Sauer, 2004. "Will Eastern European Migrants Happily Enter the German Pension System after the EU Eastern Enlargement?," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 124(1), pages 1-30.
  7. KYZYMA Iryna, 2013. "Changes in the patterns of poverty duration in Germany, 1992-2009," CEPS/INSTEAD Working Paper Series 2013-06, CEPS/INSTEAD.
  8. Fehr, Hans & Habermann, Christian, 2006. "Pension reform and demographic uncertainty: the case of Germany," Journal of Pension Economics and Finance, Cambridge University Press, vol. 5(01), pages 69-90, March.
  9. Erling Holmøy & Kyrre Stensnes, 2008. "Will the Norwegian pension reform reach its goals? An integrated micro-macro assessment," Discussion Papers 557, Research Department of Statistics Norway.
  10. Axel H. Börsch-Supan & Anette Reil-Held & Christina B. Wilke, 2007. "How an Unfunded Pension System looks like Defined Benefits but works like Defined Contributions: The German Pension Reform," MEA discussion paper series 07126, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.

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