Employment models which include permanent positions and long-term employee retention can no longer be taken for granted. An increasing number of employees are working in so-called mini-jobs, or they are facing longer periods of unemployment and lower wages, a development which the German pension system is not adequately prepared for. The risk of old-age poverty is therefore expected to increase until 2036. The proportion of 67-year-old pensioners entitled to basic security benefits in old-age will also experience further increases and reach a share of seven per cent in 2036. However, many of the reform proposals which are currently under discussion cannot reverse this trend as they fail to provide targeted approaches with regard to the risk groups and the expansion of the low-wage sector. These are the findings of a study conducted by ZEW and DIW, which aims to provide forecasts regarding the retirement income from statutory, private and workplace pension schemes between 2015 and 2036 on the basis of representative data on household incomes.
Thanks to this analysis, researchers were for the first time able to gain insights into the development of old-age poverty of the so-called baby boomers, who will start to retire in 2022. According to the study, the risk of old-age poverty will increase by 20 per cent until 2036 (2015: 16 per cent). One in five newly retired pensioners aged 67 and over would therefore be at risk of poverty in old age. According to the study, pensioners are at risk of old-age poverty if their needs-based net household income was below 958 euros per month in 2014 (60 per cent of the median income of total household income in Germany). At the same time, the authors of the study expect the share of over-67s entitled to basic security benefits to increase further. Based on their calculations, it is likely that seven per cent of newly retired pensioners (2015: 5.4 per cent) will depend on social benefits since their income does not cover subsistence.
Risk of old-age poverty is almost four times higher for single women
Single women, the long-term unemployed and low-skilled workers are at the highest risk of facing old-age poverty. In the future almost one in three single women who enter retirement may require basic security benefits. Between 2015 and 2036, the share of female pensioners entitled to benefits is expected to increase from 16 to almost 28 per cent. For single women, the risk of poverty in old age is therefore almost four times higher than the average old-age poverty rate (seven per cent). The share of the long-term unemployed entitled to basic security benefits is expected to increase from 19 to 22 per cent, while old-age poverty among people without vocational training will increase from ten to 14 per cent. The study also finds significant differences between pensioners in East and West Germany. In East Germany, the risk of old-age poverty will experience a considerable increase, doubling from five to eleven per cent. By contrast, the share of pensioners in West Germany entitled to basic security benefits will rise by a mere six per cent (2015: 5.5 per cent). Workers who were in full-time employment for at least 35 years are at the lowest risk of poverty in old age, with 1.8 per cent of them being entitled to benefits in 2036.