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

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  • Bonin, Holger

    (IHS - Institute for Advanced Studies, Vienna)

Abstract

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.

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  • Bonin, Holger, 2001. "Will it Last? An Assessment of the 2001 German Pension Reform," IZA Discussion Papers 343, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp343
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    1. 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.
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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(1), pages 69-90, March.
    2. 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.
    3. Börsch-Supan, Axel & Reil-Held, Anette & 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.
    4. Akin Serife Nuray, 2012. "Immigration, Fiscal Policy, and Welfare in an Aging Population," The B.E. Journal of Macroeconomics, De Gruyter, vol. 12(1), pages 1-45, July.
    5. 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.
    6. Wagener, Andreas, 2004. "On intergenerational risk sharing within social security schemes," European Journal of Political Economy, Elsevier, vol. 20(1), pages 181-206, March.
    7. Assar Lindbeck & Mats Persson, 2003. "The Gains from Pension Reform," Journal of Economic Literature, American Economic Association, vol. 41(1), pages 74-112, March.
    8. Börsch-Supan, Axel & Reil-Held, Anette & Wilke, Christina Benita, 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. 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.
    10. Börsch-Supan, Axel & Reil-Held, Anette & Wilke, Christina Benita, 2007. "How an unfunded pension system looks like defined benefits but works like defined contribtuions : the German pension reform," Papers 07-09, Sonderforschungsbreich 504.
    11. Iryna Kyzyma, 2014. "Changes in the Patterns of Poverty Duration in Germany, 1992–2009," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(S2), pages 305-331, November.
    12. KYZYMA Iryna, 2013. "Changes in the patterns of poverty duration in Germany, 1992-2009," LISER Working Paper Series 2013-06, Luxembourg Institute of Socio-Economic Research (LISER).
    13. 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, Department of Economics.
    14. 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.
    15. 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.

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    More about this item

    Keywords

    pension funding; Germany; Pension reform; fiscal projections;
    All these keywords.

    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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