Pension expert Bernd Raffelhüschen is a gifted storyteller who can break down great social phenomena on the individual. Baby boomers are responsible for the demographic problem because they have too little offspring in the world. “How many children do you actually have?”he asks directly. in 1987 he dealt for the first time with the capital coverage of the pension in a scientific paper, in 1989 he completed his dissertation with simulation calculations. Since then, he has followed how other countries (Norway and Sweden, for example) consistently introduced capital cover and Germany hesitantly.
Philipp Krohn Editor in Business, responsible for “People and Business”.
Four years ago, the finance professor, who works on generational contracts at the Freiburg Research Center, presented a “pension atlas” with the fund company Union Investment, which bundles some detailed data on pension provision in Germany. Again, the pension rights for all 20- to 65-year-old Germans were calculated and compared with the real supply. On average, the 36 million people with statutory insurance can expect to receive 47 percent of their last income in retirement.
If you set the standard of living with 60 percent of the last income, two-thirds of this age group create this exclusively with payments from the first shift (ie from the statutory pension, civil servant pensions, professional claims or the Rürup pension). The 20 million Germans with additional claims from the second (funded pension: company pension scheme, Riester) and third shifts (real estate, financial assets) would on average exceed this 60 percent mark.
Groups with the highest pension requirements benefit the most
This is a passable result, Raffelhüschen finds. However, it cannot be assumed that the status quo will be maintained. “In the future, the 47 percent will only be achieved through higher burdens on work or taxes,” says the Freiburg professor. If younger people had to pay a 25 percent contribution rate in a few years, they would compare themselves with older population groups, which are responsible for the decline in births. Therefore, they should be financially responsible. “But even the new federal government seems unwilling to do so,” he says.
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The effect of the Riester pension is underestimated, according to the pension Atlas, whose author Union Investment is the market leader in the distribution of this pension product. Raffelhüschen has also been criticized by some interest groups for his supervisory board mandates with financial service providers and his commitment to the New Social Market Economy initiative. In fact, the publication’s data show that the groups with the highest pension needs, i.e. young people, women and low earners, in particular, benefit from the Riester model. If the wage replacement rate on average for all Riester customers is 13.9 percent, it amounts to 16.5 percent for young people, 16.9 percent for women and 20.6 percent for those with incomes below 1,100 euros per month.
Higher federal subsidy
In the age group of 20 to 30-year-olds, 43.2 percent have a contract. In this cohort in particular, the entitlement to a company pension is particularly low at 2.7 percent. This also applies to the group of lowest earners who are similarly entitled to occupational pension rights. And here, too, the Riester participation rate is particularly high at 43.9 percent. “Personal initiative and several pillars keep retirement provision sustainable,” says Hans Joachim Reinke, Member of the Board of Management of Union Investment: “But the demographic problem will remain. By 2045, there will be twice as many pensioners.“
