The Concept of a German Citizens’ Fund
Project period: February 2019 – May 2019
Research Areas:
Tasks
The world economy faces a period of low interest rates, which has led to favorable debt conditions for the German state. At the same time German private investors find it increasing difficult to provide for their old age in view of low interest rates. Against this background, this study examines the question of whether the German state can use its high creditworthiness to support citizens' wealth creation.
Methods
The project analyzes a model of German citizens’ fund, which issues debt and invests in stocks, real estate and bonds. Its surplus is used to finance a lump sum of each currently young individual when he or she reaches the future statutory retirement age of 67.
Results
Simulations with different scenarios regarding assumptions of yield differentials show that debt-financed investment at an annual rate of 0.5 per cent of GDP and average differential of returns of two percentage points yields a lump sum per capita at age 67 of 16,000 Euro in prices of 2020 after participation throughout the working age. Should the interest differential lie at three percentage points, that lump sum would rise to around 30,000 Euro.
Publication (in German)
Fuest, Clemens, Christa Hainz, Volker Meier and Martin Werding, Das Konzept eines deutschen Bürgerfonds, ifo Institute, Munich, 2019 PDF Download
