Scenarios for the Sustainable Financing of the State Pension System

Axel Börsch-Supan, Tabea Bucher-Koenen and Johannes Rausch, MEA – Munich Center for the Economics of Aging at the Max-Planck-Institut für Sozialrecht und Sozialpolitik, Munich, show that the position of the state pension system through 2030, the timeframe of the latest pension insurance report, is stable in terms of the markers set out in §154 Volume VI of the Social Code. As legislation currently stands, however, the contribution rate will exceed the 22% marker as of 2031 and the net pre-tax pension level will fall short of the 43% ceiling as of 2036. Fixing the net pension level at 46% (50%) would give rise to annual additional costs of around 17.5 (38) billion euros and would raise the contribution rate in 2040 to over 24% (26%). An automatic adjustment of age-related parameters of the state pension scheme to life expectancy rates, by contrast, could maintain the pension level sustainably higher than 43% without an increase in the contribution rate of over 23%. Following this line of thought, there is not only no financial scope for expanding social benefits, but on the contrary, it remains necessary to implement reforms in order to ensure the long-term financial sustainability of the state pension system.