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Demography feast: Pensions and life expectancy

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  • Jakob von Weizsäcker
  • Martin Werding

Abstract

According to a new study by demographers Jim Oeppen and James W. Vaupel, the life expectancy of women increases every year by around 89 days, the life expectancy of men by about 81 days. If this also holds true for Germany, we may see a life expectancy of 93.1 years for women and 85.9 years for men in 2050. German pension policies - and also the model computations of the Ifo Institute - have been based up to now on estimates such as "variant 2" of the 9th coordinated population estimate of the Federal Statistical Office. This scenario calls for a rise of life expectancy by 2050 of only four years above today's level of 80.5 years for women and 74.4 years for men, or 84.5 years and 78.1 years, respectively. If one replaces these assumptions in the Ifo model with the trends predicted by Oeppen and Vaupel, the basis of calculation of the development in pension contributions and pension benefits changes dramatically in the long-term: whereas the elderly dependency ratio, that is the relationship of 65 year-olds to 15-65 year-olds, increases in the Federal Statistical Office scenario from currently 25% to 48% by 2050, in the trend extrapolation scenario it rises to 64%. According to the Ifo Institute a solution for pension financing could consist in linking the pension entry age to the increase in life expectancy.

Suggested Citation

  • Jakob von Weizsäcker & Martin Werding, 2002. "Demography feast: Pensions and life expectancy," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 55(11), pages 42-45, June.
    • Handle: RePEc:ces:ifosdt:v:55:y:2002:i:11:p:42-45
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    References listed on IDEAS

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    1. Thum Marcel & Weizsäcker Jakob von, 2000. "Implizite Einkommensteuer als Messlatte für die aktuellen Rentenreformvorschläge," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 1(4), pages 453-468, November.
    2. Martin Werding, 2000. "Rentenreform: Modellrechnungen zu den langfristigen Effekten," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 53(28-29), pages 39-42, November.
    3. Hans-Werner Sinn & Martin Werding, 2000. "Reducing the level of pension payments and a partially funded social insurance system - Ifo recommendations for a consolidation of the pay-as-you-go system," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 53(18), pages 12-25, June.
    4. Robert Fenge & Martin Werding, 2004. "Ageing and the tax implied in public pension schemes: simulations for selected OECD countries," Fiscal Studies, Institute for Fiscal Studies, vol. 25(2), pages 159-200, June.
    5. Robert Fenge & Jakob Weizsäcker, 2001. "Compulsory Savings: Efficiency and Redistribution On the Interaction of Means Tested Basic Income and Public Pensions," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 8(4), pages 637-652, August.
    6. Martin Werding, 2000. "Pension reform: model calculations on long-term effects," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 53(28), pages 39-42, November.
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    Citations

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    Cited by:

    1. Werding, Martin, 2011. "Demographie und öffentliche Haushalte: Simulationen zur langfristigen Tragfähigkeit der gesamtstaatlichen Finanzpolitik in Deutschland," Working Papers 03/2011, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
    2. Werding, Martin, 2016. "Rentenfinanzierung im demographischen Wandel: Tragfähigkeitsprobleme und Handlungsoptionen," Working Papers 05/2016, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
    3. Valentin Vogt & Jörg Althammer, 2016. "Linking Retirement Age to Life Expectancy in a Bismarckian System - The Case of Germany," National Institute of Economic and Social Research (NIESR) Discussion Papers 465, National Institute of Economic and Social Research.
    4. Wolfgang Ochel & Martin Werding, 2002. "And where do the jobs come from? Critical comments on the proposals of the Hartz Commission," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 55(15), pages 10-18, August.

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    More about this item

    JEL classification:

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

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