The ‘Equity Pension’ Experiment
Germany’s retirement reform — and where the ‘Aktienrente’ falls short
If you are relying on a state pension anywhere in the world, you might wonder whether, by the time you reach retirement age, the government will really be able to afford to pay you one. This question is justified, especially in countries where it represents the majority of retirement income, while demographic change puts the entire ‘pay-as-you-go’ system at risk. That is the problem Germany is trying to tackle — with the introduction of a pension buffer component funded with returns from investments in the capital markets. However, while such an idea clearly has merit and offers a step in the right direction, there are a few problems with it at the moment.
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The current system is unsustainable
The German pension system, like those of most European countries, consists of 3 pillars: (1) statutory pension insurance (Gesetzliche Rentenversicherung), (2) corporate pension plans…
