Pensions Between Economic Realities and Legal Constraints

On 2 July 2026, ZEW hosted the #ZEWlive webinar “The Future of Pensions: Economic Realities and Legal Constraints” with Professor Tabea Bucher-Koenen, head of the ZEW Research Unit “Pensions and Sustainable Financial Markets” and professor at the University of Mannheim, and Professor Constanze Janda, President of the German University of Administrative Sciences Speyer and Professor for Social Security Law and Administrative Science. The speakers discussed the reform proposals put forward by the Pensions Commission, of which they were members and which was co-chaired by Janda along with Frank-Jürgen Weise. The event was moderated by Benjamin Bidder, economics editor at DER SPIEGEL. The discussion centred on the issues of ensuring a pension system that is financially viable despite demographic change and that guarantees against poverty in retirement. 

Constanze Janda presented the Pension Commission’s proposals as an “integrated work of art”. In her view, the 33 recommendations should not be considered in isolation but implemented using a coherent whole-system approach. The key target is a net replacement rate of at least 70 per cent after tax as overall level of retirement provision. To safeguard retirement living standards, the commission proposes to discontinue the benchmark pension level at 48 per cent of the average income after 2031 and to supplement the declining pension level with a mandatory funded pension modelled on Sweden’s system. This is to be situated within the first pillar, financed on a parity basis and built up through individual accounts. Janda advocated the reinstatement of the sustainability factor so that the ratio of contributors to beneficiaries is taken into account in pension adjustments. For age groups approaching retirement who cannot yet benefit sufficiently from the capital-funded pension pillar, the commission envisages a transitional factor which is to act as a pension supplement and ensure that new pensioners do not fall below the current pension level.

Tabea Bucher-Koenen assessed the proposals from an economic perspective. She pointed out that pension policy must be considered over the long term and that short-term fixes would not suffice. A significant increase in the contribution rate was already expected for 2027 and 2028, driven by demographic trends. The proposed measures could not completely prevent this short-term effect, but they could put the system on a more sustainable path in the long term. A key element of this was the mandatory funded pension. Bucher-Koenen explained that the calculations did not rely on a fixed return assumption but instead considered various investment horizons, return trajectories and crisis scenarios. Severe financial market downturns were also factored in to realistically reflect the risks. According to the calculations, the transition factor was significantly more favourable than continuing to apply the benchmark pension level, as the transition factor was limited to entry-level pensions and would only need to close the gap that could not yet be filled by the funded pension in the initial phase.