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

36 Pages Posted: 27 Aug 2001

See all articles by Holger Bonin

Holger Bonin

IZA Institute of Labor Economics; ZEW – Leibniz Centre for European Economic Research

Date Written: August 2001

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.

Keywords: Pension Reform, Pension Funding, Fiscal Projections, Germany

JEL Classification: F22, E66

Suggested Citation

Bonin, Holger, Will it Last? An Assessment of the 2001 German Pension Reform (August 2001). Available at SSRN: https://ssrn.com/abstract=281405 or http://dx.doi.org/10.2139/ssrn.281405

Holger Bonin (Contact Author)

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany
+49 228 3894 303 (Phone)
+49 228 3894 510 (Fax)

ZEW – Leibniz Centre for European Economic Research

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

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