What would be if we were Sweden? Is the Swedish Pension system transferable to Germany?

Abstract

Sweden is regularly mentioned as a possible model for a reform of the German Pension Insurance System. However, this is done mostly without paying attention to the differences in the initial demographic situation of both countries. In this study, the consequences of these differences for the design of the pension insurance systems in both countries are analyzed. It becomes apparent that Sweden faces considerably smaller demographic challenges. The contribution rate of the German Statutory Pension Insurance would increase by less than 2.8 percentage points until 2060 with a Swedish population structure. Simultaneously, the gross standard pension level would be 3.4 percentage points higher until 2060. Vice versa, a change to the Swedish NDC system with a constant contribution rate of 20% in Germany would induce a reduction of the average gross pension level that is more than twice as high compared to the reduction under the current system. This is completely attributable to the different assignment of the demographical burden to pensioners and contributors.

Please find the complete Discussion Paper here.