Mannheim Research Institute for the Economics of Aging www.mea.uni-mannheim.de Pension Reform in Germany: Introducing a multi-pillar system to cope with demographic change Dr. Anette Reil-Held Seminar on Pension Reform Instituto de Empresa, Madrid, July 19th, 2010
15
Embed
Pension Reform in Germany: Introducing a multi-pillar system to cope with demographic change
Pension Reform in Germany: Introducing a multi-pillar system to cope with demographic change. Dr. Anette Reil-Held Seminar on Pension Reform Instituto de Empresa, Madrid, July 19th, 2010. Many. Few. The motivation for a multipillar system. Problem 1: Babyboom and Babybust. - PowerPoint PPT Presentation
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Mannheim Research Institute for the Economics of Aging www.mea.uni-mannheim.de
Pension Reform in Germany: Introducing a multi-pillar system
to cope with demographic change
Dr. Anette Reil-Held
Seminar on Pension Reform
Instituto de Empresa, Madrid, July 19th, 2010
2
The motivation for a multipillar system
1950 2001 2050
Source: 11th Population Projection by the Federal Statistical Office
Problem 1: Babyboom and Babybust
„Problem 2:“ Increase of life-expectancy
Solution 2:
Increase retirement
age
Many
Few
Solution 1:
Partial Funding
3
The Riester-Reform 2001: a Paradigm Shift towards a Multipillar System
Three aims:
1. Sustainable contribution rates (below 20% until 2020, below 22% until 2030)
2. Secure long-term stability of pension levels: net replacement rate must stay above 67 %
3. Spread of supplementary private pension savings to compensate the lower pension level (individual and occupational pension plans)
New Pension formula
Retirement Saving Incentives
Minimum Pension (means tested)
Instruments
The Reform Package on the whole
„Sustainability Commission“ in 2003
New set of assumptions about future demographic and economic development revealed that Riester Goals cannot be met.
Paradigm shift: think in financial possibilities.
Two main reform elements Introduce sustainability factor in pension formula
(Gross Pension Level will further decline from 48% in 2000 to 41% in 2040)
Increase retirement age from 65 to 67
55
The Framework of the „Riester-Pension“
Goal: Build up supplementary, voluntary, funded old-age provision assuring an overall level of provision of 70 % (like pre-reform)
Subsidies in form of flat-rate benefits and tax relief (deferred taxation principle)
In general, everyone is eligible who is affected by the reduction in public pension benefits (employees, wage compensation beneficiaries, and also spouses)
Pension plans need to be “certified”, criteria are e.g: Regular saving payments Provider must guarantee a strictly positive rate of return Pension benefits must be disbursed as certain forms of lifelong
annuities Administrative and marketing costs must be spread over initially