Germany 2011

Germany’s retirement income system comprises an earnings-related pay-as-you-go system based on the number of pension points earned during an individual’s career; a means-tested safety net for low-income pensioners; and supplementary pension plans which are common amongst major employers. These plans typically either adopt a book reserving approach, with or without segregated assets, or an insured pensions approach.

The following table shows Germany’s position when compared to the 15 other countries and some of the indicators that either scored relatively well or poorly.

The overall index value for the German system could be increased by:

• raising the minimum pension for low-income pensioners
• increasing the requirement that part of the retirement benefit must be taken as an income stream
• increasing the labour force participation rate amongst older workers
• increasing the level of assets available to support retired workers
• improving the level of communication from pension arrangements to members

The German index value rose very slightly from 54.0 in 2010 to 54.2 in 2011. However this overall stability masked a decline in the sustainability sub-index (arising from a reduced score in three of the indicators) which was offset by an improvement in the Integrity sub-index which allowed for the important role of the PSVaG, the German pension insolvency fund.