The Political Economy of Pension Reform
Edited by Martin Rein and Winfried Schmähl
Chapter 6: Paradigm Shift in German Pension Policy: Measures Aiming at a New Public–Private Mix and their Effects
6. Paradigm shift in German pension policy: measures aiming at a new public–private mix and their eﬀects Winfried Schmähl INTRODUCTION Germany has one of the oldest public pension schemes in the world. When in 1889 the political decision on the design of the statutory (social) pension insurance was made, a number of structural elements were introduced that more than one hundred years later still inﬂuence pension schemes.1 However, since the late nineteenth century a lot of changes have taken place in the process of adapting pension arrangements to changing conditions in the environment of pension schemes, such as demography, economy, household structures and living conditions, but also in political objectives and dominating normative positions in the country. Nevertheless, there has also been some continuity. Several attempts or proposals to abolish the social insurance scheme that is mainly based on contribution payments were not successful.2 Pension reform has been a topic debated worldwide for many years and also has a high ranking on the political agenda in Germany. Pension reform was also of great importance in several election campaigns to the Federal Parliament after the Second World War. One of the central questions in recent debates is the role of the state in general as well as in pension policy. Pay-as-you-go (PAYGO)-ﬁnanced public schemes in particular are under severe political pressure in Germany. Often a radical shift towards capital funding is proposed, which is in general linked to proposals for privatizing at least major parts...
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