Growing old in dignity

Research Paper (undergraduate) from the year 2011 in the subject Politics - Political Systems - Germany, grade: 1,0, University of applied sciences, Düsseldorf, course: Economics - MBA, Master of Business Administration, language: English, abstract: This paper surveys the situation of the German pension system after a sequence of reformswhich started as a fully funded system implemented by Bismarck during the 1880s, with amandatory retirement age of 70 years when male life expectancy at birth was less than 45years. Today, life expectancy for men is more than 80 years.After a long and arduous debate in the German Bundestag, agreements on a comprehensivepension reform resulted in the pension reform of 1957, which mainly established changessuch as the normal retirement age at 65, the retirement at the age of 60 for elderlyunemployed, the retirement for women at the age of 60 and, at last, the introduction ofdynamic benefits indexed to gross wages which had an immediate impact on the economicwellness of current retirees.Thereafter, the 1972 reform made the German pension system one of the most generous ofthe world, as it mainly opened the public pension insurance system to all workers withgenerous terms for back-payment of contributions and eased the terms and conditions forearly retirement by the implementation of the so-called 'flexible retirement', as discussed inchapter 1 of this paper.The following pension reforms discussed in this paper are the "Riester reform" of 2001 withthe following main objectives: the sustainability of contribution rates in order to secure thelong-term stability of pension levels and the spread of supplementary private pension savings,and continuing with the efforts of the Rürup commission which culminated in the "Rürupreform" of 2004 which the objective to stabilize contribution rates while at the same timeensuring appropriate future pension levels.Based on the above, it can be concluded that on the whole the sequence of pension reforms inGermany has successfully converted what was once a so called monolithic Bismarckian publicinsurance system to an efficient multi-pillar. Given this situation, as discussed in chapter 2 ofthis paper, the German pension system nowadays are based in a three-pillar system, consistingof the following elements: The first and most important pillar is universal and mandatory,organized as a pay-as-you-go system. The second pillar is the voluntary occupational pensionsystem which is also universal and mandatory, but capital funded. The third pillar is alsocapital funded, but organized as a voluntary private provision system.