Financial Aspects of Life Cycle Arrangements from a Long-Term Point of View: ‘Social Risks’ and Social Security in Old Age

Abstract

Growing insecurity over the life course and an increasing demand for more individual flexibility are a challenge for adequate social security, for example in old age. This paper outlines how ‘social risks’ are taken into account in public as well as (subsidised) private pension schemes (including occupational schemes), such as those in Germany. This becomes more important because in many countries the role of the state as provider of social security benefits is being scaled down. Starting from objectives and concepts for designing social security for old age, the major focus of the paper is the effects of different types of public as well as private pension schemes on income in old age in relation to different social risks, such as loss of income in case of unemployment, illness, caring for children and by using different instruments (among other things, time saving accounts). Finally, the shift of risks and responsibility in the (at least partial) privatisation of social security – from state to private households, from employers to employees – is discussed. If private schemes become mandatory, they may become an instrument of (public) social policy and have to cover some of the social risks that public schemes have in the past.