A German pensioner like a donut in butter? This system won't last long. In Poland it's even worse
Consulting company Mercer shed light on the weaknesses of the German pension system. Together with the CFA Institute, a global association of financial analysts, and Monash University in Melbourne, it compared pension systems from 48 countries in different parts of the world. The results show that Germany is far behind in two of the three main aspects.
The Mercer Global Pension Index evaluates pension programs based on over 50 indicators, which in turn are grouped into three sub-indexes: Suitability, Sustainability and Reliability.
How to evaluate the pension system? Three key elements
“Adequacy” focuses on the question of how well the system currently meets the needs of retirees. This concerns primarily the level of benefits, but also, for example, the structure of the system or the question of whether there are tax incentives for saving for retirement. This sub-index is included in the overall index with a weight of 40%.
In the area of ”Sustainable Development” research checks whether the system will still be able to meet its obligations in 10, 20 or 30 years. For example, demographic data, income from contributions, economic growth and the level of public debt are taken into account. This sub-index has a weight of 35%. in the overall assessment.
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Finally, system reliability is weighted at 25 percent. Supervision and legal standards are assessed here, but also, for example, whether institutions operate efficiently and responsibly, how high costs are and whether there are reserves. In short, it's about how much you can trust the system and institutions.
The overall index aims to show how “good” or “effective” a pension system is. As a result, many countries topped the list that you wouldn't necessarily expect. Places one to five are occupied by the Netherlands, Iceland, Denmark, Singapore and Israel, all of which scored over 80 points. In the overall ranking, Germany's position is not very good: 21st place with only 67.8 points. It's barely mid-table, with even countries like Croatia and Mexico ahead of Germany. [Polska znalazła się na 32. miejscu z 57 punktami, tuż za Botswaną i Malezją i USA, ale przed Włochami, Chinami i Japonią — red.].
Trust in the system is decreasing
The German system performs relatively well only in the “adequacy” sub-index, ranking 9th. The level of pensions is therefore considered adequate. However, it is questionable whether this will remain the case given the lack of stability, which in turn is reflected in a lack of trust.
The assessment of the German pension system is much worse in other partial aspects. Germany ranks only 30th in the area of reliability and 34th in the area of sustainability. In both categories, the world's third largest economy has been surpassed by countries such as Kazakhstan, Malaysia and Botswana.
This is a devastating result and should be treated as an indictment of the German pension system. The study clearly shows that the system is not sustainable. Long-term financing is not guaranteed and confidence in the system is shaky or has even fallen.
“They are financing a system from which they themselves will have little benefit”
However, what experts have discovered is actually nothing new. Over the past decades, countless committees have already identified shortcomings and proposed solutions. Nevertheless, the ruling coalition has still not initiated a reform that would solve the main problems. Instead, another commission was appointed to investigate the matter.
Dr. Ruediger Maas, private archiveDie Welt
— We've known that for decades the system will break down and we are doing too little to change it – warns Ruediger Maas, a researcher of generations. He was involved in the preparation and analysis of a survey on how German society perceives the future viability of the pension system.
The study revealed that many respondents believe that the burden placed on younger people in particular is unfair. 44 percent respondents rate the financial burden placed on the younger generation by the pension and social security systems as “too high”, while only a third consider it adequate. — The intergenerational agreement is a slap in the face to young people, says Maas. — They are financing a system from which they themselves will benefit little.
However, the study also found that while citizens always call for reforms, they are mostly opposed to specific proposals. Increasing the retirement age is supported by only 10 to 17 percent. different age groups. The introduction of a share-based pension – a project that went quite far under the previous government but disappeared in the freezer of the current finance minister – still enjoys the greatest support.
The study shows that many younger people feel the double burden of rising taxes today and uncertain pension rights tomorrow. On the other hand, older people feel under increasing moral pressure due to the debate about their acquired rights. “We need to really think this through,” Mass admonishes. — A fair intergenerational contract must include everyone, including government officials and the self-employed. This is the only way to regain trust.
