Mittwoch, 15. Juli 2009

German Pensions

According to press reports, "experts" of the Deutsche Rentenversicherung have calculated that Germany's public pension system is not in fact a bad deal for the contributors.

Specifically, an average income-earner retiring between 2030 and 2040 will receive a return of 2.8 % (male) / 3.3 % (female) on the contributions made.

Sounds decent.

The catch:

Nobody tells us what the assumptions are. And the assumptions (inflation, real income growth, number of contributors, taxpayer subsidies) are crucial. The calculation results are completely meaningless without knowing the assumptions.

I tried to find the study on the website of Deutsche Rentenversicherung, but it doesn't seem to be there. Or maybe they are hiding it in some obscure corner of the website.


  1. Understanding how they arrive at that number, would be interesting. I would guess that especially the social components of the insurance contribute to the positive ROI. E.g., a woman giving birth to a child would obviously has a far better ROI than in a normal life insurance, as she doesn't "pay" for the return she receives.

    Well, I will write a post on the pension issue myself. ;)

  2. Well, depends.... a woman giving births has a negative ROI on the child investment.... at least in monetary terms. Bringing up a child is connected with very high costs. My children easily cost a flat (each).

  3. The ROI would be calculated based on the "money" you spend on the pension. When you take time off (e.g. give birth), you dont contribute any money to your pension. However, the state pension counts that time as contribution. So you get a very good ROI.

  4. True. In terms of looking at the financial return earned on the pension contribution only, having children helps. Not sure if the effect is big though, considering the length of a working life. Unless she has lots of kids.