"Germany Needs a Tax-Funded Guaranteed Pension Scheme"


Yesterday, the federal government published its "Old-Age Security Report 2016". According to the report, it is crucial that people in Germany make additional private retirement provision for old age, since the pension level will decrease significantly in light of the demographic change. This presents particular risks for persons with low incomes. Prof. Dr. Andreas Peichl, head of the Research Group "International Distribution and Redistribution" at the Centre for European Economic Research (ZEW), argues in favour of a change of system in order to guarantee retirement incomes in the future.

"The latest 'Old-Age Security Report' once again made clear that it is not viable for retirement payments to run on public funds only. What we need is a change of system in order to effectively address poverty in old age.

On the one hand, German citizens need to become more active in making private old-age provision. Just like in the Scandinavian countries, all employees should be obliged to contribute between two and three per cent of their gross income to a state fund, which guarantees additional retirement provision through capital market investments.

On the other hand, the Scandinavian model may be complemented by tax-funded pension payments which are guaranteed by law, in order to effectively combat poverty in old age without the need for pension supplement payments."

For more information please contact:

Prof. Dr. Andreas Peichl,  Phone +49 (0)621/1235-389, E-mail peichl@zew.de