The German Pension Reform – A Major Improvement on a PAYG System

The German pension reform which was passed in the Summer of 2001 will lower the level of statutory pension payments (financed by PAYG) and will introduce a new "pillar" of private pensions which are pre-funded, voluntary, and subsidised. Compared with the aims of an ideal pension reform that were formulated by a large group of German and non-German economists, the German pension reform seems to be a small step, which will not be sufficient but will soon be followed by subsequent and larger steps. Many observers believe that the pension level should be lowered even further and that the share of funded claims within the old age security package should be increased ...