March 12, 2020 | Press Release

Pensions in Germany: Living well in old age

How much saving is necessary for a good life in old age? © iStockphoto.com/macgyverhh

How much should working people in Germany save for their retirement? There are a lot of very different recommendations. Christian Dudel and colleagues looked at savings targets for retirement and calculated new ones themselves. They concluded that at least 88 percent of the last net income is necessary to secure the same standard of living.

The good news first: the German social security system is better than its reputation. On average, it amounts to around 70 percent of the last net income. This is enough at the moment, and probably also in the future, to avoid poverty. For average earners, this is possible with 33 to 50 percent of the last net income.

But to maintain the same standard of living in retirement, 88 to 98 percent of the last net income is needed. Only a few pensioners in Germany achieve this. This is not possible with social security alone, but this gap can be closed through personal and employers’ retirement plans.

"In Germany, company pensions are only common in certain sectors, such as the chemical industry," says Christian Dudel. The scientist at the Max Planck Institute for Demographic Research (MPIDR) points to the Netherlands: there, state and company pensions are combined, usually reaching 100 percent of the last net income.

Christian Dudel and colleagues published their findings and an overview of current pension recommendations in the March issue of the magazine Wirtschaftsdienst. The study and its new calculations are primarily intended to provide a working knowledge, not only for policymakers but also for pension insurers and individuals who want to plan for their retirement needs.

Original publication

Dudel, C., Schmied, J., Werding, M.: Sicherungsziele für die Rente: empirische
Messung und Ergebnisse. Wirtschaftsdienst. (2020) DOI: 10.1007/s10273-020-2601-y