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Personal assets and pension reform: How well prepared are the Germans?

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  • Börsch-Supan, Axel
  • Essig, Lothar

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

Abstract

Demographic change presents major financing problems for the pay-as-you-go pension system. In response to these problems, the 2001 and 2004 German pension reforms reduced the statutory level of benefits from the pay-as-you system. The resulting pension gap is supposed to be filled by funded second and third pillar private pensions. This paper examines the extent to which households are in a position today to close this gap with their personal assets, assuming that they stick to their current saving and asset accumulation behaviour. Four critical factors are relevant to this issue: 1. the anticipated life expectancy, 2. the level of personal assets on retirement 3. the expected age of retirement, and 4. the anticipated interest rate. Our results indicate that about a third of German households will not be able to fill the pension gap unless they were to change their current savings behaviour.

Suggested Citation

  • Börsch-Supan, Axel & Essig, Lothar, 2005. "Personal assets and pension reform: How well prepared are the Germans?," MEA discussion paper series 05085, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    • Handle: RePEc:mea:meawpa:05085
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    References listed on IDEAS

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    1. Barbara Berkel & Axel Börsch-Supan, 2004. "Pension Reform in Germany: The Impact on Retirement Decisions," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 60(3), pages 393-421, September.
    2. 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.
    3. Börsch-Supan, Axel & Ludwig, Alexander & Reil-Held, Anette, 2004. "Hochrechnungsmethoden und Szenarien für gesetzliche und private Renteninformationen," MEA discussion paper series 04049, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
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    7. Hans-Martin von Gaudecker, 2004. "Regionale Mortalitätsunterschiede in Baden-Württemberg," MEA discussion paper series 04046, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    8. Hans Fehr & Dirk Kiesewetter & Michael Myßen, 2003. "Die Riester-Rente - ein Flop?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 56(05), pages 5-14, March.
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    Cited by:

    1. Bucher-Koenen, Tabea & Kluth, Sebastian, 2013. "Subjective Life Expectancy and Private Pensions," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79806, Verein für Socialpolitik / German Economic Association.
    2. repec:mea:meawpa:12265 is not listed on IDEAS
    3. Bucher-Koenen, Tabea & Kluth, Sebastian, 2013. "Subjective Life Expectancy and Private Pensions," MEA discussion paper series 201214, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    4. Dummann, Kathrin, 2008. "Retirement saving and attitude towards financial intermediaries: Evidence for Germany," Thuenen-Series of Applied Economic Theory 99, University of Rostock, Institute of Economics.

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