The German Pension Reform Package 2014: Consequences of the “Mütterrente” and “Rente mit 63”

The great coalition’s pension reform of 2014 includes two controversially discussed components: the so called “Mütterrente” (additional pension benefits for mothers who gave birth before 1992) and “Rente mit 63” (early retirement without actuarial reductions at age 63 for individuals with a contribution history of at least 45 years). This project analyzes the reforms’ effects on the contribution rate and pension level as well as the employment effects due to the changed contribution rate. We assume that all individuals eligible for the “Rente mit 63” will take it up. The size of this group before and after the reform is then estimated using the scientific use file of the pension systems administrative data called “Versichertenkontenstichprobe” (VSKT). The effects on the contribution rate and the pension level are calculated with the pension simulation model MEA-Pensim, the employment effects with the micro-simulation-model STSM of the DIW Berlin. On average we find that the contribution rate will increase by 0.3 percentage points until 2035. At the same time the pension level will decrease on average by 0.6 percentage points. The change in behavior due to the “Rente mit 63” will reduce the labor force on average by 120,000 persons. However, all effects will decrease in the long run. The higher contribution rate would lead to a loss of about 25,000 full-time positions. The results of this project are summarized in a report for “Initiative Neue Soziale Marktwirtschaft GmbH – INSM” which partially financed this project. Additionally, the isolated effects of the “Mütterrente” were presented in a discussion paper (MEA Discussion Paper 08-2014). The isolated effects of the “Rente mit 63” as well as a more detailed analysis of the eligible and non-eligible group before and after the reform are summarized in another discussion paper (MEA Discussion Paper 17-2014) and was published in "Perspektiven der Wirtschaftspolitik". This is a joint project with Stefan Bach und Peter Haan (both Deutsches Institut für Wirtschaftsforschung (DIW) Berlin).