Germany’s retirement income system comprises an earningsrelated 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 adopt either 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:
- Increasing the minimum pension for low-income pensioners
- Increasing coverage of employees in occupational pension plans
- Increasing the labour force participation rate at older ages as life expectancies rise
- Improving the level of communication from pension arrangements to members
The German index value fell from 62.0 in 2015 to 59.0 in 2016 primarily due to a reduction in the net replacement rate.