Zielrente: The solution to an aging society in Germany?

• Applicant: Professorin Dr. An Chen
• Subject Area: Accounting and Finance
• Term: from 2019 to 2022
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 418318744

One of the major societal challenges is the changing demographics due to our aging society. How to provid pension security is a very challenging Task in contemporary social security, both in developed industrial and developing countries. Diverse measures have been taken to provide better pension security.In Germany, the role of occupational pension plans and private pension plans, the second and third pillar of the three-pillar pension system, has beensubstantially enhanced. According to the new law of occupational pension plans (Betriebsrentenstärkungsgesetz), a new occupational pensionplan, so-called "Zielrente", was introduced and implemented in 2018. In this research proposal, we aim to model this new occupational pension plan and find out whether the pension beneficiaries will be better off through this new plan. One main component of the Zielrente is that sponsoring companies do not need to provide guaranteed pension payments to their employees (pension beneficiaries).It is beneficial to the sponsoring companies, as they no longer have to build up high reserves to cover possible unfavorable market developments. However, manypension beneficiaries are reluctant to give up guaranteed payments, as they believe that their benefits will deteriorate through this. By setting up a collectiveinvestment problem, we aim to find out whether giving up guarantees really worsens the benefits of the pension beneficiaries. Can we design a more flexibleguarantee scheme, which allows each pension beneficiary to choose her own flexible (fixed or state-dependent) guarantee level, such that the overall welfare of thepension beneficiaries is improved?Through the proposed projects, we model and compare the "Zielrente" with other alternative occupational pension plans. We aim to provide to a solution to the main question raised in this proposal: "Can the Zielrente be the solution to our ageing society"?

• DFG Programme: Research Grants