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How risky is the German pension system? The volatility of the internal rates of return

Matthias Heidler and Bernd Raffelhüschen

No 138, Discussion Papers from Albert-Ludwigs-Universität Freiburg, Institut für Finanzwissenschaft

Abstract: In this paper we analyze exemplarily the volatility of the internal rates of return of the German pension system over the life-cycle of an individual born in 1957. The outcome is compared to an alternative defined-contribution or defined-benefit policy. Based on the actual data, our resultsshow the volatility of the internal rate of return to be significantly higherunder the actual policy. We furthermore find that the sustainable internalrates of return are close to zero for the youngest male cohorts and posi-tive for females for optimistic growth scenarios. In more realistic scenariosthings turn worse.

Keywords: risk; internal rate of return; sustainability (search for similar items in EconPapers)
JEL-codes: H55 J18 (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:alufin:138

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