Growing old in dignity (ePub)

Research Paper (undergraduate) from the year 2011 in the subject Politics - Political Systems - Germany, grade: 1,0, University of applied sciences, Düsseldorf, course: Economics - MBA, Master of Business Administration, language: English, abstract: This paper surveys the situation of the German pension system after a sequence of reforms
which started as a fully funded system implemented by Bismarck during the 1880s, with a
mandatory retirement age of 70 years when male life expectancy at birth was less than 45
years. Today, life expectancy for men is more than 80 years.
After a long and arduous debate in the German Bundestag, agreements on a comprehensive
pension reform resulted in the pension reform of 1957, which mainly established changes
such as the normal retirement age at 65, the retirement at the age of 60 for elderly
unemployed, the retirement for women at the age of 60 and, at last, the introduction of
dynamic benefits indexed to gross wages which had an immediate impact on the economic
wellness of current retirees.
Thereafter, the 1972 reform made the German pension system one of the most generous of
the world, as it mainly opened the public pension insurance system to all workers with
generous terms for back-payment of contributions and eased the terms and conditions for
early retirement by the implementation of the so-called 'flexible retirement', as discussed in
chapter 1 of this paper.
The following pension reforms discussed in this paper are the "Riester reform" of 2001 with
the following main objectives: the sustainability of contribution rates in order to secure the
long-term stability of pension levels and the spread of supplementary private pension savings,
and continuing with the efforts of the Rürup commission which culminated in the "Rürup
reform" of 2004 which the objective to stabilize contribution rates while at the same time
ensuring appropriate future pension levels.
Based on the above, it can be concluded that on the whole the sequence of pension reforms in
Germany has successfully converted what was once a so called monolithic Bismarckian public
insurance system to an efficient multi-pillar. Given this situation, as discussed in chapter 2 of
this paper, the German pension system nowadays are based in a three-pillar system, consisting
of the following elements: The first and most important pillar is universal and mandatory,
organized as a pay-as-you-go system. The second pillar is the voluntary occupational pension
system which is also universal and mandatory, but capital funded. The third pillar is also
capital funded, but organized as a voluntary private provision system.