IDEAS home Printed from https://ideas.repec.org/p/zbw/alufin/138.html
   My bibliography  Save this paper

How risky is the German pension system? The volatility of the internal rates of return

Author

Listed:
  • Heidler, Matthias
  • Raffelhüschen, Bernd

Abstract

In this paper we analyze exemplarily the volatility of the internal rates of return of the German pension system over the life-cycle of an individual born in 1957. The outcome is compared to an alternative defined-contribution or defined-benefit policy. Based on the actual data, our resultsshow the volatility of the internal rate of return to be significantly higherunder the actual policy. We furthermore find that the sustainable internalrates of return are close to zero for the youngest male cohorts and posi-tive for females for optimistic growth scenarios. In more realistic scenariosthings turn worse.

Suggested Citation

  • Heidler, Matthias & Raffelhüschen, Bernd, 2005. "How risky is the German pension system? The volatility of the internal rates of return," Discussion Papers 138, Albert-Ludwigs-Universität Freiburg, Institut für Finanzwissenschaft.
    • Handle: RePEc:zbw:alufin:138
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/38833/1/503990345.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Christian Keuschnigg & Mirela Keuschnigg & Reinhard Koman & Erik Lüth & Bernd Raffelüschen, 2000. "Public Debt and Generational Balance in Austria," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 27(3), pages 225-252, September.
    2. Börsch-Supan, Axel, 2005. "Risiken im Lebenszyklus Theorie und Evidenz," MEA discussion paper series 05069, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    3. John McHale, 2001. "The Risk of Social Security Benefit-Rule Changes: Some International Evidence," NBER Chapters, in: Risk Aspects of Investment-Based Social Security Reform, pages 247-290, National Bureau of Economic Research, Inc.
    4. 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.
    5. Börsch-Supan, Axel, 2005. "Risiken im Lebenszyklus: Theorie und Evidenz," Sonderforschungsbereich 504 Publications 05-05, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    6. John Y. Campbell & Martin Feldstein, 2001. "Risk Aspects of Investment-Based Social Security Reform," NBER Books, National Bureau of Economic Research, Inc, number camp01-1, March.
    7. Börsch-Supan, Axel, 2005. "Risiken im Lebenszyklus : Theorie und Evidenz," Papers 05-05, Sonderforschungsbreich 504.
    8. Jochen Michaelis & Michael Pflüger, 2000. "The impact of tax reforms on unemployment in a SMOPEC," Journal of Economics, Springer, vol. 72(2), pages 175-201, June.
    9. Axel Börsch‐Supan, 2005. "Risiken im Lebenszyklus: Theorie und Evidenz," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 6(4), pages 449-469, November.
    10. David Bradford, 1991. "Tax Policy and the Economy, Volume 5," NBER Books, National Bureau of Economic Research, Inc, number brad91-1, March.
    11. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Christoph Borgmann & Matthias Heidler, 2007. "Volatility of Social Security Wealth: Political Risks of Benefit-Rule Changes in Germany," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 63(1), pages 83-106, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Heidler, Matthias & Raffelhüschen, Bernd, 2005. "How risky is the German pension system? The volatility of the internal rates of return," FZG Discussion Papers 6, University of Freiburg, Research Center for Generational Contracts (FZG).
    2. David Laibson, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(2), pages 443-478.
    3. 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.
    4. Benz, Ulrich & Fetzer, Stefan, 2004. "Indicators for Measuring Fiscal Sustainability: A Comparative Application of the OECD-Method and Generational Accounting," Discussion Papers 118, Albert-Ludwigs-Universität Freiburg, Institut für Finanzwissenschaft.
    5. Honerkamp, Josef & Moog, Stefan & Raffelhüschen, Bernd, 2004. "Earlier or Later: A General Equilibrium Analysis of Bringing Forward an Already Announced Tax Reform," Discussion Papers 123, Albert-Ludwigs-Universität Freiburg, Institut für Finanzwissenschaft.
    6. Feist, Karen & Krimmer, Pascal & Raffelhüschen, Bernd, 2001. "Intergenerative Effekte einer lebenszyklusorientierten Einkommensteuerreform: Die Einfachsteuer des Heidelberger Steuerkreises," Discussion Papers 98, Albert-Ludwigs-Universität Freiburg, Institut für Finanzwissenschaft.
    7. Krimmer, Pascal & Raffelhüschen, Bernd, 2003. "Intergenerative Umverteilung und Wachstumsimpulse der Steuerreformen 1999 bis 2005: Die Perspektive der Generationenbilanz," Discussion Papers 105, Albert-Ludwigs-Universität Freiburg, Institut für Finanzwissenschaft.
    8. Libor Dušek & Juraj Kopecsni, 2008. "Policy Risk in Action: Pension Reforms and Social Security Wealth in Hungary, Czech Republic, and Slovakia," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 58(07-08), pages 329-357, Oktober.
    9. Börsch-Supan, Axel, 2005. "Risiken im Lebenszyklus : Theorie und Evidenz," Papers 05-05, Sonderforschungsbreich 504.
    10. Jeff Dominitz & Charles F. Manski & Jordan Heinz, 2002. "Social Security Expectations and Retirement Savings Decisions," NBER Working Papers 8718, National Bureau of Economic Research, Inc.
    11. Robert Grafstein, 2015. "Public pensions and the intergenerational politics of aging societies," Journal of Theoretical Politics, , vol. 27(3), pages 457-484, July.
    12. Veronika Deeg & Christian Hagist & Stefan Moog, 2009. "The fiscal outlook in Austria: an evaluation with Generational Accounts," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 36(4), pages 475-499, November.
    13. Berger, Johannes & Graf, Nikolaus & Strohner, Ludwig & Schuh, Ulrich, 2013. "Ein Schulden-Check für Österreich," Policy Notes 5, EcoAustria – Institute for Economic Research.
    14. Karin Mayr, 2004. "The fiscal impact of immigrants in Austria--a generational accounting analysis," Economics working papers 2004-09, Department of Economics, Johannes Kepler University Linz, Austria.
    15. Axel Börsch‐Supan, 2005. "Risiken im Lebenszyklus: Theorie und Evidenz," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 6(4), pages 449-469, November.
    16. Libor Dusek, 2007. "Political Risk of Social Security: The Case of the Indexation of Benefits in the Czech Republic," CERGE-EI Working Papers wp318, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    17. Muriel Bouchet, 2003. "The sustainability of the private sector pension system from a long-term perspective: the case of Luxembourg," BCL working papers 6, Central Bank of Luxembourg.
    18. Andrew Coleman, 2014. "To Save or Save Not: Intergenerational Neutrality and the Expansion of New Zealand Superannuation," Treasury Working Paper Series 14/02, New Zealand Treasury.
    19. Börsch-Supan, Axel, 2005. "Risiken im Lebenszyklus: Theorie und Evidenz," Sonderforschungsbereich 504 Publications 05-05, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    20. Feldstein, Martin & Liebman, Jeffrey B., 2002. "Social security," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324, Elsevier.

    More about this item

    Keywords

    risk; internal rate of return; sustainability;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:alufin:138. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/iffrede.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.