The Reform of Old-Age Pension Systems in Germany – Irrelevant Objectives, Misleading Indicators and Mistargeted Reforms

However, this line of reasoning is misleading, as the level of a statutory pension is not a sufficient indicator of the potential risks of poverty in old age. Sufficient means of living in retirement are secured not only through statutory, occupational and private pensions, but also through accrued wealth. The present study analyses a survey conducted by the Deutsche Bundesbank, the German central bank, on the income and wealth of private households. Calculated exclusively on the basis of income, the poverty risk rate among individuals in households whose main income earner receives a statutory old-age pension stands at 17.8 per cent. If, however, the assets of this group are converted into a hypothetical pension income, the rate falls to 11 per cent. It is evident that the majority of the population succeed in securing their standard of living in retirement through both income and assets. Even within the group of statutory old-age pensioners who, by conventional definition, are considered at risk of income poverty, net assets frequently contribute to secure a living standard above the income poverty threshold. The implications of this conclusion for retirement pension policy are far-reaching: rather than taking an alleged need to improve social welfare as an excuse to water down the insurance-based nature of the statutory pension system, the existing scheme should be retained with only minor adjustments.