The German Retirement Benefit Formula: Drawbacks and Alternatives

Arbeitspapier

In this paper we identify a number of objectionable features of the German retirement benefit formula. We show that groups of insureds with higher than average life expectancy, in particular high-income groups, are subsidized by the rest of the membership because the formula neglects differences in group-specific life expectancy. Furthermore, the current formula leads to undesirable long-run effects if the earnings ceilings is raised, mandatory membership is extended, life expectancy rises or the rate of population growth declines. We present two alternative formulas which take group-specific life expectancy into account. In particular, a return-rate formula which rewards each Euro of contributions with the internal rate of return of the pay-as-you-go pension system proves to be superior to the current formula

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: DIW Discussion Papers ; No. 326

Classification and Topics

• Classification: Wirtschaft ; Taxation and Subsidies: Incidence ; Demographic Economics: Public Policy ; Social Security and Public Pensions
• Subject: Rentenversicherung ; implizite Besteuerung ; intra- und intergenerative Gerechtigkeit ; pay-as-you-go pension systems ; implicit taxation ; intra- and intergenerational equity ; Gesetzliche Rentenversicherung ; Versicherungstechnik ; Verteilungswirkung ; Generationenbeziehungen ; Gerechtigkeit ; Deutschland ; Rentenformel

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kifmann, Mathias ; Breyer, Friedrich
• Event: Veröffentlichung
• (who): Deutsches Institut für Wirtschaftsforschung (DIW)
• (where): Berlin
• (when): 2003

Further information

• Handle: http://hdl.handle.net/10419/18062
• Last update: 10.03.2025, 11:45 AM CET