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Projection methods and scenarios for public and private pension information

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  • Börsch-Supan, Axel
  • Reil-Held, Anette
  • Ludwig, Alexander

    (Munich Center for the Economics of Aging (MEA))

Abstract

Public pensions – the primary pillar of old-age income provision – will, in the future, be less generous than they have been in the past, in particular owing to the impact of demographic change. The pension gap is supposed to be plugged by the second and third pillars of pension provision. However, people require reliable planning information if they are to exercise greater individual responsibility. It is therefore absolutely essential that adequate information is made available about the level of pension benefits that will be generated by each pillar of old-age pension provision. This paper outlines a number of different means of presenting the level of future pensions and the assumptions on which such extrapolations are necessarily based. Our work is based on an assumed average rate of inflation of 1.5% and an average rate of real income growth not exceeding 1.5%. This last figure is derived from calculations made in the framework of a macroeconomic simulation model. This model also shows that while the funded pillar of oldage pension provision is not entirely immune to population aging, it is not substantially threatened by a substantial decrease in stock market prices, the so-called “asset meltdown†.

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  • Börsch-Supan, Axel & Reil-Held, Anette & Ludwig, Alexander, 2005. "Projection methods and scenarios for public and private pension information," MEA discussion paper series 05068, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
  • Handle: RePEc:mea:meawpa:05068
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    References listed on IDEAS

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    1. Lothar Essig & Anette Reil-Held, 2003. "Chancen und Risiken der "Riester-Renter"," MEA discussion paper series 03035, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    2. Axel Börsch‐Supan & Alexander Ludwig & Joachim Winter, 2006. "Ageing, Pension Reform and Capital Flows: A Multi‐Country Simulation Model," Economica, London School of Economics and Political Science, vol. 73(292), pages 625-658, November.
    3. Eldar Shafir & Peter Diamond & Amos Tversky, 1997. "Money Illusion," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(2), pages 341-374.
    4. Börsch-Supan, Axel H. & Heiss, Florian & Winter, Joachim, . "Akzeptanzprobleme bei Rentenreformen: Wie die Bevölkerung überzeugt werden kann," Monographs in Economics, University of Munich, Department of Economics, number 20198, November.
    5. Axel H. Boersch-Supan & Joachim K. Winter, 2001. "Population Aging, Savings Behavior and Capital Markets," NBER Working Papers 8561, National Bureau of Economic Research, Inc.
    6. Martin Werding & Harald Blau, 2002. "The impact of demographic change on public finances: projections for the German public pension scheme: Model calculation up to 2050," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 8.
    7. Börsch-Supan, Axel & Ludwig, Alexander & Winter, Joachim, 2004. "Aging, Pension Reform, and Capital Flows:," Sonderforschungsbereich 504 Publications 04-65, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
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