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


  • Bonin, Holger

    () (IZA)


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.

Suggested Citation

  • Bonin, Holger, 2001. "Will it Last? An Assessment of the 2001 German Pension Reform," IZA Discussion Papers 343, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp343

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    References listed on IDEAS

    1. Hans-Werner Sinn & Marcel Thum, 1999. "Gesetzliche Rentenversicherung: Prognosen im Vergleich," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 56(1), pages 104-140, March.
    2. Alan J. Auerbach & Jagadeesh Gokhale & Laurence J. Kotlikoff, 1991. "Generational Accounts: A Meaningful Alternative to Deficit Accounting," NBER Chapters,in: Tax Policy and the Economy, Volume 5, pages 55-110 National Bureau of Economic Research, Inc.
    3. Sinn, Hans-Werner, 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," CEPR Discussion Papers 1734, C.E.P.R. Discussion Papers.
    4. 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.
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    Cited by:

    1. 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.
    2. 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.
    3. Assar Lindbeck & Mats Persson, 2003. "The Gains from Pension Reform," Journal of Economic Literature, American Economic Association, vol. 41(1), pages 74-112, March.
    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 Group Munich.
    5. Erling Holmøy & Kyrre Stensnes, 2008. "Will the Norwegian pension reform reach its goals? An integrated micro-macro assessment," Discussion Papers 557, Statistics Norway, Research Department.
    6. 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.
    7. KYZYMA Iryna, 2013. "Changes in the patterns of poverty duration in Germany, 1992-2009," LISER Working Paper Series 2013-06, LISER.
    8. 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.
    9. 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.
    10. 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.
    11. 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.

    More about this item


    pension funding; Germany; Pension reform; fiscal projections;

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions

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