IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Notional Defined Contribution : A Comparison of the French and the German Point Systems

  • Legros, Florence
Registered author(s):

    The paper discusses similarities and differences between NDC and the French and German point systems. The study focuses on how these systems differ when there is an external shock (demographic, economic, or other) and discusses the possible consequences of moving from the point system to NDC. The French point system—because it does not have automatism in its indexing device —can be regulated each year according to forecasts. The paper concludes that this may be the best way to react to changes in the economic and demographic environment. However, to do so this requires, first, reliable and frequent forecasts, and, second, total independence of the governing board of the scheme from the retiree and worker lobbies. While the second requirement can be handled with rules, as opposed to the current state of affairs, it is questionable as to whether the first requirement can be fulfilled. Germany has adopted a method to correct the excessive generosity of the scheme with what the author calls a “return spring”—a mechanism in which the pension yield is lowered in relation to a desired contribution rate. This mechanism is reinforced by the “Rürup sustainability factor,” which explicitly introduces the dependency ratio and accounts for life expectancy changes. With this strategy, it is probable that the German scheme will move into surplus within some years, allowing for a reserve that might be needed for intergenerational transfers. The paper concludes by asking the question, why introduce NDC ? The author’s answer is that financial defined contribution (FDC) schemes promote individual responsibility, while NDC maintains the principle of social cohesion in public pension schemes.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/6478.

    in new window

    Date of creation: Sep 2003
    Date of revision:
    Publication status: Published in Document de travail - CEPII, 2003
    Handle: RePEc:dau:papers:123456789/6478
    Contact details of provider: Web page:

    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Valkonen, Tarmo, 2002. "Demographic Uncertainty and Taxes," Discussion Papers 816, The Research Institute of the Finnish Economy.
    2. Queisser, Monika, 1996. "Pensions in Germany," Policy Research Working Paper Series 1664, The World Bank.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:dau:papers:123456789/6478. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alexandre Faure)

    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 references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.