Pension adjustment and its problems. A critical overview of the measures, exemplified on the basis of the German pension scheme

Abstract

German citizens claiming an old-age pension have long been encouraged to have benefits coming from different pension schemes. It is not known, however, whether this mixed source system can continue to perform adequately since measures for adjusting pension payments to reflect economic changes vary according to the sources of pension income. A pensioner who finds their income from one strand of their pension scheme reducing cannot be sure that another strand will compensate, and that poses a threat to their level of financial security. The aim of this paper is to analyse the adjustments made to retirement incomes from the theoretical point of view, as well as to show the opportunities and risks presented by the mixed source systems of old-age pension provision. The paper gives a brief overview of the German pension adjustment system, which will be used to illustrate purchasing power risks. The results will provide useful information for social partners and policy makers, which could assist a target-oriented review of pension schemes.