Linking Retirement Age to Life Expectancy in a Bismarckian System - The Case of Germany

Valentin Vogt () and Jörg Althammer ()

No 465, National Institute of Economic and Social Research (NIESR) Discussion Papers from National Institute of Economic and Social Research

Abstract: In times of decreasing mortality, one way to stabilise a PAYG pension system is to interrelate the retirement age to the anticipated average lifespan. This paper investigates two approaches for Germany: one is to keep the average retirement duration constant, the other to define a constant share of the total lifespan for the retirement period. Our simulation model uses a Leslie matrix population projection, a Solow-Swan growth model and a detailed calculation of the German pension insurance budget. Our results show quite a significant impact on the insurance level and a rather small effect on the contribution rate, which is characteristic of a Bismarckian system.

Date: 2016-10
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