Juli 2009

IZA Policy Paper No. 11: 15 Years of Pension Reform in Germany: Old Successes and New Threats

published in: The Geneva Papers on Risk and Insurance - Issues and Practice, 2009, 34, 548-560

The paper surveys the state of German pension system after a sequence of reforms aimed at achieving long-term sustainability. We argue that the latest reforms have moved pension provision in Germany in principle from a defined benefit to a defined contribution scheme, and that this move has stabilized pension finances to a large extent. We furthermore argue that the real economy consequences of the global financial crisis create threats to the core success factors of the reforms – cutting pension levels and raising mandatory pension age. Finally the paper discusses further possible reform measures, including the option to install a fourth pillar providing income in retirement through working after pension age.