Christina Benita Wilke

How Sensitive are Subjective Retirement Expectations to Increases in the Statutory Retirement Age? The German Case

Population Aging poses an evident threat to the financial sustainability of pension systems based on a “pay-as-you-go†(PAYG) scheme. To cope with this threat, pension systems have undergone numerous reforms in many countries in order to keep people longer at work. One crucial element of these reforms typically is an increase in the statutory retirement age at which workers are legally allowed to retire. Two questions still remain unanswered: Will people really work longer? Who is more likely to retire before the new legal retirement age? In this paper, we focus on subjective retirement expectations, analysing if and to what extent they are affected by such a policy change. We consider the legislative reform introduced in Germany in 2007, which gradually will increase the statutory retirement age (SRA) from 65 to 67 years. Using the SAVE survey, a representative panel of German households, we estimate the increase of the individuals’ expected retirement age (ERA) as an effect of the reform. Our results show that less productive workers living in relatively wealthier households are more likely to plan an early retirement. The introduction of the reform seems to motivate better educated workers to remain longer in the labour force although it does not seem to completely succeed in keeping women longer in the labour force: especially among the younger cohorts, whose SRA will be 67 years, women are still more likely than men to plan an early retirement. In terms of the magnitude of the effect, we find that the reform shifted the expectations of the younger cohorts by almost two years – if these expectations will be realized, this reform would have been quite successful.

German pension reform

Contents: Demographic challenges and labor market potentials for the German pension system - Evaluation of the German pension reform process - Notional defined contribution systems as a reform alternative - Intergenerational distribution and deterministic and stochastic internal rates of return.

Shifting perspectives: German pension reform

Pension reform is high on the agenda almost everywhere in Europe. The contributions to this Forum outline the different pension systems of selected European countries, providing an assessment of both the reform steps taken so far and the need for further reform.

Ruhestandseinkommen und Renteneintrittsalter im europäischen Vergleich

Dieser Beitrag untersucht das Renteneinkommen und das Renteneintrittsalter in Deutschland und vergleicht diese mit unsren europaischen Nachbarn. Dieses Thema ist in letzter Zeit aus drei Grunden wieder in den Vordergrund der sozialpolitischen Debatte geruckt. Erstens wird die Babyboom-Generation alter. Waren ihr fuher Gedanken zu Rentenalter und Rentenhohe einigermasen fremd, treten diese nun zunehmend in den Mittelpunkt der eigenen Lebensplanung. Zum zweiten ist, lange Zeit von der Forschung ignoriert, das Thema Armut wieder in den Blickwinkel der empirischen Analyse geruckt. Verstarkt wird diese Aufmerksamkeit drittens durch die demographiebedingten Reformen, die das Altersvorsorgesystem komplexer gemacht haben und daher Sorgen auslosen und die Frage aufwerfen: „Wo stehe ich denn eigentlich?“.

On the Feasibility of Notional Defined Contribution Systems: The German Case

Notional defined contribution (NDC) systems have strongly been being debated in the worldwide pension literature in the past years. This paper deals with the feasibility of such NDC systems. The focus is on the German case, where the recent 2004 pension reform introduced a so-called sustainability factor, that de facto incorporates some crucial characteristics of an NDC system into the public pension system, but maintains the traditional benefit indexation formula approach. The paper analyzes the effects a hypothetical introduction of an NDC system would have on the financial situation of the German PAYG system. It is found that a genuine NDC system would be feasible in the sense that it would be financially possible and would achieve gross pension levels above, equal or only slightly below those that can be forecasted for the standard pensioner under the present German pension system. However, it is shown that an NDC system would require large buffer funds which are currently not available. Furthermore, the distribution of pension income among cohorts and across time would be very different and may be hard to motivate from a political perspective. Altogether, it becomes clear that an NDC system cannot solve the demographic problems but simply copes with them in a different way than conventional PAYG systems. Thus, it does not replace the necessity to supplement the public pension system by a funded second and third private pillar in order to prepare for the future demographic changes.