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

Matthias Heidler and Bernd Raffelhüschen

No 6, FZG Discussion Papers from University of Freiburg, Research Center for Generational Contracts (FZG)

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 results show the volatility of the internal rate of return to be significantly higher under the actual policy. We furthermore find that the sustainable internal rates of return are close to zero for the youngest male cohorts and positive for females for optimistic growth scenarios. In more realistic scenarios things 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:fzgdps:6

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