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Pensions in Germany


  • Queisser, Monika


Germany's pension system was originally designed as a scaled premium system. It formally became a pay-as-you-go system in 1957. Participation in the system is mandatory for all dependent employees and only some groups of self-employed. The system is greatly fragmented in terms of institutions, coverage, contributions, and benefit levels. A discrepancy has emerged between the system dependency ratio and the demographic old-age dependency ratio. This has been caused by the use of early retirement and disability pensions as a means of tackling high unemployment, especially in Germany's 5 new states. Except for the high incidence of early retirement and disability pensions the system does not suffer from the problems that have afflicted other pension systems (e.g. evasion). The expected demographic aging poses major challenge. The contribution rate cannot be increased so benefits will have to be cut, most likely through an increase in the normal retirement age and tighter rules for disability pensions and early retirement. Germany's system is not overly generous, compared with other OECD countries. Intragenerational redistribution in the pension system is quite limited. Germany does not have a tilted benefit formula to redistribute income from higher to lower income groups. Means-tested social assistance is used to support the old poor.

Suggested Citation

  • Queisser, Monika, 1996. "Pensions in Germany," Policy Research Working Paper Series 1664, The World Bank.
  • Handle: RePEc:wbk:wbrwps:1664

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    Cited by:

    1. repec:dau:papers:123456789/6478 is not listed on IDEAS
    2. Fehr, Hans, 1999. "Welfare Effects of Dynamic Tax Reforms," Beiträge zur Finanzwissenschaft, Mohr Siebeck, Tübingen, edition 1, volume 5, number urn:isbn:9783161470165, September.
    3. Vogt, Tobias C. & Kluge, Fanny A., 2015. "Can public spending reduce mortality disparities? Findings from East Germany after reunification," The Journal of the Economics of Ageing, Elsevier, vol. 5(C), pages 7-13.
    4. World Bank, 2002. "Reducing Vulnerability and Increasing Opportunity : Social Protection in the Middle East and North Africa," World Bank Publications, The World Bank, number 14255, June.
    5. Mary O'Sullivan, 1998. "The Political Economy of Corporate Governance in Germany," Economics Working Paper Archive wp_226, Levy Economics Institute.
    6. Whitehouse, Edward, 2001. "Pension systems in 15 countries compared: the value of entitlements," MPRA Paper 14751, University Library of Munich, Germany.
    7. Serrano, Carlos, 1999. "Social security reform, income disribution, fiscal policy, and capital accumulation," Policy Research Working Paper Series 2055, The World Bank.


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