The Retirement and Pension
System of Germany
Insights from the German Retirement and
Pension System
Carsten Weerth, Bremen...
Conclusion of the German Pension System

The task was to conclude which elements are
part of the German Retirement & Pensi...
Basic Considerations/EU
• Germany is a member state of the European
Union which consists out of 28 Member
States.
• The pe...
4 Different Pension Systems
• I. State pensions for officials and soldiers
(Pensionen).
• II. Pensions by a common system ...
System I – State Pensions
• State pensions are paid by help of taxes. The former
officials and soldiers receive 71.75 % of...
System II – General Pensions
• Pensions by a common system for all other
employees (so called Rentenversicherung, see
URL:...
System III – Transfer System
• The transfer system is again paid by help of
taxes and it only represents a basic allowance...
System IV – Private Systems
• Other private insurance systems are the so called
Rürup-Rente (Life insurance for 12 years w...
Conclusions & Recommendations I
• The state pension system for officials and soldiers is
fully tax funded. It is of the ut...
Conclusions & Recommendations II
• Mini-jobs (under 450 Euro per month) are not paying for
the normal pension system. Thes...
Conclusions & Recommendations III
• Other private insurance systems: Rürup Rente (Life
insurance for 12 years which stays ...
Acknowledgements...
This presentation was made for the final team
assingment ‘Final team project‘ of Prof. Joshua
Rauh‘s M...
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The Retirement and Pensions System of Germany

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Final report of Stanford University's Class on Finance of Retirement and Pensions.

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The Retirement and Pensions System of Germany

  1. 1. The Retirement and Pension System of Germany Insights from the German Retirement and Pension System Carsten Weerth, Bremen/Germany, Team Europe Stanford University – The Finance of Retirement & Pensions
  2. 2. Conclusion of the German Pension System The task was to conclude which elements are part of the German Retirement & Pension System. In particular new political ideas shall be made. Since this is a global MOOC from Stanford University we should be open to global answers... This team Europe has been formed in order to research Germany's pensions system.
  3. 3. Basic Considerations/EU • Germany is a member state of the European Union which consists out of 28 Member States. • The pension systems are not harmonized therefore the national member states are responsible. • In Germany there are four major different systems.
  4. 4. 4 Different Pension Systems • I. State pensions for officials and soldiers (Pensionen). • II. Pensions by a common system for all other employees (Renten). • III. Transfer payments for all other (poor) persons (Transferleistungen). • IV. Private pension systems such as RürupRente and Riester-Rente
  5. 5. System I – State Pensions • State pensions are paid by help of taxes. The former officials and soldiers receive 71.75 % of their last monthly payment per month by help of a tax funded pension. The federal state government or state government is in charge of having enough money for paying the pension. No bond has been set up before. • For details see URL: http://de.wikipedia.org/wiki/Pension_(Altersversorgung).
  6. 6. System II – General Pensions • Pensions by a common system for all other employees (so called Rentenversicherung, see URL: http://de.wikipedia.org/wiki/Gesetzliche_Rente nversicherung_(Deutschland)) which are paid for by half from the employee and by half from the employer (so called mini-jobs are not included these mini-jobbers are employed for less than 450 Euro per month). • These funds are managed by help of bonds, equity and stocks that are traded on the market.
  7. 7. System III – Transfer System • The transfer system is again paid by help of taxes and it only represents a basic allowance which is considered to be the minimum life allowance to support a family.
  8. 8. System IV – Private Systems • Other private insurance systems are the so called Rürup-Rente (Life insurance for 12 years which stays tax free, see URL: http://de.wikipedia.org/wiki/R%C3%BCrup-Rente) and Riester-Rente (Life insurance up to the age of normal entry into pension (67 years) which receives annual additional funds from the state (e.g. 300 Euro per year as an incentive), see URL: http://de.wikipedia.org/wiki/Riester-Rente.
  9. 9. Conclusions & Recommendations I • The state pension system for officials and soldiers is fully tax funded. It is of the utmost importance that the federal state and the single (16) states prepare for the pensions that they are going to pay in 40 years future time. That has not been done in the past and must be made from now on. • The pension system for all other working persons is funded half by the employers and half by the employees.
  10. 10. Conclusions & Recommendations II • Mini-jobs (under 450 Euro per month) are not paying for the normal pension system. These are the poorest employed persons which have to have three jobs in order to get a proper income but will not get a state pension for their effort. Theses mini-jobs should be made part of the normal pension system. • The transfer system again is paid by help of taxes and only represents a basic allowance which is considered to be the minimum life allowance to support a family. Most persons should have a job which can care for a state pension. The transfer system is not the care for all persons.
  11. 11. Conclusions & Recommendations III • Other private insurance systems: Rürup Rente (Life insurance for 12 years which stays tax free, see URL: http://de.wikipedia.org/wiki/R%C3%-BCrup-Rente) and Riester Rente (life insurance up to the age of normal entry into pension (67 years) which receives annual funds from the state (e.g. 300 Euro per year), see URL: http://de.wikipedia.org/wiki/Riester-Rente are meant to give "richer" employers higher pensions. • However these private investment life insurances are mostly investing in bonds and therefore the outcomes under the current economic conditions are uncertain.
  12. 12. Acknowledgements... This presentation was made for the final team assingment ‘Final team project‘ of Prof. Joshua Rauh‘s MOOC Finance of Retirement & Pensions, Stanford University. This assignment shall be the presentation of one state retirement and pension system.

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