Germany 2010

Germany’s retirement income system comprises an earnings-related pay-asyou-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 overall index value for the German system could be increased by:

• raising the minimum pension for low-income pensioners;
• increasing the requirement that partof 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; and
• improving the level of communication from pension arrangements to members.

The German index value rose from 48.2 in 2009 to 54.0 in 2010 due, in part, to an increased recognition of some of the features of the commonly used book reserving approach.