The German Retirement Benefit Formula : Drawbacks and Alternatives
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| Type of Publication: | Journal article |
| Publication status: | Published |
| Author: | Breyer, Friedrich; Kifmann, Mathias |
| Year of publication: | 2004 |
| Published in: | FinanzArchiv ; 60 (2004), 1. - pp. 63-82. - ISSN 0015-2218. - eISSN 1614-0974 |
| URL of original publication: | http://www.jstor.org/stable/40913028, Last access on Mar 31, 2016 |
| Summary: |
We identify several objectionable features of the German retirement benefit formula. Groups of insureds with higher than average life expectancy are subsidized by the rest of the members because the formula neglects differences in group-specific life expectancy. Moreover, undesirable long-run effects arise if the earnings ceiling is raised or mandatory membership is extended, or if life expectancy rises or the rate of population growth declines. We present three alternative formulas. In particular, a return-rate formula that rewards contributions with the internal rate of return of the pay-as-you-go pension system is superior to the current formula. This formula corresponds to the concept of ''notional defined contribution'' pensions that has been recently introduced in several countries.
|
| JEL Classification: | H55, H22, J18 |
| Subject (DDC): | 330 Economics |
| Keywords: | Pay-As-You-Go pension systems, implicit taxation, notional defined contributions, intra- and intergenerational equity |
| Bibliography of Konstanz: | Yes |
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BREYER, Friedrich, Mathias KIFMANN, 2004. The German Retirement Benefit Formula : Drawbacks and Alternatives. In: FinanzArchiv. 60(1), pp. 63-82. ISSN 0015-2218. eISSN 1614-0974
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