A Fragile Pillar: Statutory Pensions and the Risk of Old-Age Poverty in Germany

Abstract

The statutory pension system is the most important source of income for senior citizens in Germany. Due to increasing disruptions in employment biographies since the 1970s and due to the mass unemployment in eastern Germany since the 1990s, there is a growing fear of postretirement poverty in Germany. We develop a microsimulation model to compare the distribution of statutory pension incomes for new retirees in 2020 with the incomes of new retirees in 2004. The pension income distribution is calculated for eastern and western Germany separately, for men and women, and for different skill levels. Throughout Germany, we find growing postretirement poverty, especially among low-skilled workers. Eastern Germany will lose its current advantage in high pensions and low inequality.

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