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Financial sustainability of the German statutory pension scheme through 2060– Can higher fertility rates and immigration mitigate the financial pressure?

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Zeitschrift für die gesamte Versicherungswissenschaft

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Notes

  1. Cohorts born from 1956 through 1965 are characterized as baby-boom generation (Simonson et al. 2011).

  2. The (net) replacement rate is the proportion of the (net pre-tax) pension of a standard retiree (45 years of entitlement for pensions) to the average (net pre-tax) wage income.

  3. See § 154 Social Codebook VI.

  4. They consider values of 1.2, 1.4, 1.6 and 2.1 for fertility rates and 0, 100,000 and 200,000 for net migration.

  5. The use of West German data is appropriate, as the difference in mortality rates between East and West Germany diminishes over time (see Federal Statistical Office 2012b).

  6. Compared to migration, we consider a longer adjustment period through 2030 for fertility due to a less dynamic adjustment process in this component.

  7. A net immigration value of zero does not imply that there is no migration. We assume a constant emigration of 600,000 persons. Therefore, a value of zero indicates an immigration of 600,000 persons.

  8. Similar projections can be found in Wilke (2009) and Holthausen et al. (2012). The model is constructed in Excel 2007 and utilizes Visual Basic for Applications (VBA).

  9. This fraction as well as all subsequent values can be found in German Statutory Pension Insurance Scheme (2012).

  10. The retirement age could be below 50 or above 70. However, the fraction of retirees in these categories is small and can thus be ignored without significantly influencing the results (see also Holthausen et al. 2012).

  11. The total contribution rate is 15.5 %; 0.9 % of the rate is covered by the retiree, and the remaining contribution rate is divided equally between the retiree and statutory pension insurance. Therefore, pension insurance must pay a contribution rate of 7.3 %.

  12. The contribution rate is divided equally between employees and employers. The contribution must be paid up to a certain ceiling, which is € 5,800 in West Germany and € 4,900 in East Germany for 2013.

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Authors and Affiliations

  1. Center for Risk and Insurance, Otto-Brenner-Straße 1, 30159, Hannover, Germany

    Andy Zuchandke

  2. Institute for Risk and Insurance, Leibniz University Hannover, Koenigsworther Platz 1, 30167, Hannover, Germany

    Ute Lohse & Johann-Matthias Graf von der Schulenburg

Authors
  1. Andy Zuchandke
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  2. Ute Lohse
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  3. Johann-Matthias Graf von der Schulenburg
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Correspondence to Andy Zuchandke.

Appendix

Appendix

Table 2 Impact of a variation in the fertility rate on the contribution and replacement rates in percentage points (own calculations)
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Table 3 Impact of a variation in the net migration (in thousands) on the contribution and replacement rates in percentage points (own calculations)
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Zuchandke, A., Lohse, U. & von der Schulenburg, JM. Financial sustainability of the German statutory pension scheme through 2060– Can higher fertility rates and immigration mitigate the financial pressure?. ZVersWiss 103, 283–299 (2014). https://doi.org/10.1007/s12297-014-0271-9

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