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The Notional Defined Contribution Pension Scheme and the German ‘Point System’: A Comparison

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  • Vera Gurtovaya
  • Sergio Nisticò

Abstract

This paper examines the analytical properties of the German ‘points‐based’ pension system. These properties are compared with those of a canonical Notional Defined Contribution (NDC) pension scheme. The paper identifies the circumstances under which the German ‘points‐based’ system would mimic a Swedish‐type NDC scheme and verifies to what extent the German ‘points‐based’ scheme ensures uniformity of individual rates of return for some hypothetical careers. Finally, the paper proposes a set of new possible adjustment rules able to increase similarity between the German point system and the NDC scheme.

Suggested Citation

  • Vera Gurtovaya & Sergio Nisticò, 2018. "The Notional Defined Contribution Pension Scheme and the German ‘Point System’: A Comparison," German Economic Review, Verein für Socialpolitik, vol. 19(4), pages 365-382, November.
    • Handle: RePEc:bla:germec:v:19:y:2018:i:4:p:365-382
    DOI: 10.1111/geer.12127
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    1. Assar Lindbeck & Mats Persson, 2003. "The Gains from Pension Reform," Journal of Economic Literature, American Economic Association, vol. 41(1), pages 74-112, March.
    2. Robert Holzmann & Edward Palmer, 2006. "Pension Reform : Issues and Prospects for Non-Financial Defined Contribution Schemes," World Bank Publications - Books, The World Bank Group, number 6983.
    3. Axel H. Börsch-Supan & Christina B. Wilke, 2003. "The German Public Pension System: How it Was, How it Will Be," Working Papers wp041, University of Michigan, Michigan Retirement Research Center.
    4. Sandro Gronchi & Sergio Nisticò, 2008. "Theoretical Foundations Of Pay‐As‐You‐Go Defined‐Contribution Pension Schemes," Metroeconomica, Wiley Blackwell, vol. 59(2), pages 131-159, May.
    5. Salvador Valdes‐Prieto, 2000. "The Financial Stability of Notional Account Pensions," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(3), pages 395-417, September.
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