From 2002 onwards, pension reforms in Germany will lead to billions of euros in capital flows which will continue to grow year on year. In 2002, when the first year state funding of private pension schemes is introduced, these capital flows are likely to amount to around 20 billion euros.

They will continue to rise considerably until 2008, because funding is to increase gradually until this date. The capital flows are finally expected to peak at 38 billion euros in 2010. A portion of the money intended to provide for workers in old age will also be invested as venture capital by banks, life insurance companies and pension funds.

A study by the Centre for European Economic Research (ZEW) in Mannheim and commissioned by the German Federal Ministry for Education and Research has shown that by 2002 extra funds to the amount of 164 million euros can already be expected in the German venture capital market. After reaching the maximum level of funding set out in the pension reforms, the yearly surplus of additional venture capital is likely to rise as high as 280 million euros by 2010. This represents more than seven per cent of the average yearly cash flow in the venture capital market from the years 1997 to 2000.

The calculations on which this study is based predict, on the one hand, that the savings rate will go up slightly as those with a pension scheme react to the planned reduction of the pension level. On the other, they also expect private investors to restructure their portfolios by shifting their investments from non-funded products to funded ones on a larger scale (deadweight effect). This will be achieved, for example, by adapting current contracts to fit the new funding criteria. The ZEW study claims that this deadweight effect will amount to 50 per cent based on the extra capital flows resulting from maximum usage of the funding opportunities. Furthermore, the study predicts that 90 per cent, though not all, of those entitled to claim funding will actually make a claim. The study bases its prognosis for the future behaviour of institutional investors in terms of their venture capital investment on the previous behaviour of banks and insurances providers. The study also anticipates that pension funds will establish a similar structure to that of life insurance providers.


Dr. Michael Schröder, Telefon: 0621/1235-140, E-Mail:

Dr. Tereza Tykvová, Telefon: 0621/1235-147, E-Mail:





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