Abstract
The German government has recently adopted a reform package for a statutory pension insurance plan to ensure that the pension level will not fall below 48 % and that the contribution rate will not exceed 20 % through 2025. In addition, there are planned improvements in “Mütterrente” (a pension for mothers), assistance for people with reduced earning capacity and those who do not earn enough. The total extra cost of these measures is estimated at approximately 32 billion euro, financed by funds from the statutory pension system and by increased federal subsidies. It is not yet known pay-as-you-go pension system will be reformed after 2025. The author suggests establishing a “German Pension Fund” as a capital backed fund with a highly diversified investment portfolio. A German sovereign wealth fund of this kind could make an important contribution to greater intergenerational equity. Financing could be provided by, for example, retaining part of the solidarity surcharge on German income tax rather than abolishing it entirely, as is currently envisaged.
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