Riester Pensions in Germany: Design, Dynamics, Targetting Success and Crowding-In

31 Pages Posted: 28 Apr 2012  

Axel H. Börsch-Supan

Max Planck Society for the Advancement of the Sciences - Munich Center for the Economics of Aging (MEA)

Michela Coppola

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Social Law and Social Policy

Anette Reil-Held

affiliation not provided to SSRN

Date Written: April 2012

Abstract

Riester pensions are voluntary, but heavily subsidized private pension schemes in Germany. They were designed as a matching defined contribution scheme to fill the emerging "pension gap" that is being generated by the gradually declining generosity of the public pay-as-you-go pensions in response to population aging. This paper investigates how the uptake of the recently introduced "Riester pensions" depends on the state-provided saving incentives and how well the targeting to families and low-income households has worked in practice. It documents the costs of the scheme, and collects circumstantial evidence on displacement effects between saving for old-age provision and other purposes.After a slow start and several design changes, Riester pension plans took off very quickly. While saving incentives were effective in reaching parents, they were somewhat less successful in attracting low-income earners, although Riester pensions exhibit a more equal pattern by income than occupational pensions and unsubsidized private pension plans. Riester pension savings totaled €9.4bn in 2010 with an associated cost of €3.5bn. One average one Euro of subsidies is thus associated with 2 Euros of households' own Riester saving.There is no evidence that Riester pensions have crowded out other saving. While households who plan to purchase housing and who attach high importance to a bequest motive are less likely to have a Riester pension, several regression results show that occupational pensions and other forms of private pensions act as complements rather than as substitutes. Aggregate national saving has increased since the introduction of Riester pensions.

Suggested Citation

Börsch-Supan, Axel H. and Coppola, Michela and Reil-Held, Anette, Riester Pensions in Germany: Design, Dynamics, Targetting Success and Crowding-In (April 2012). NBER Working Paper No. w18014. Available at SSRN: https://ssrn.com/abstract=2047265

Axel H. Börsch-Supan (Contact Author)

Max Planck Society for the Advancement of the Sciences - Munich Center for the Economics of Aging (MEA) ( email )

Amalienstrasse 33
Munich, 80799
Germany

HOME PAGE: http://www.mea.mpisoc.mpg.de

Michela Coppola

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Social Law and Social Policy ( email )

Amalienstraße 33
München, 80799
Germany

HOME PAGE: http://www.mea.mpisoc.mpg.de/index.php?id=230&no_cache=1&tx_meamitarbeiteranzeige_pi1[showUid]=1084&

Anette Reil-Held

affiliation not provided to SSRN

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