Working Paper: NBER ID: w18014
Authors: Axel H. Börsch-Supan; Michela Coppola; Anette Reilheld
Abstract: Riester pensions are voluntary, but heavily subsidized private pension schemes in Germany. They were designed as a matching defined contribution scheme to fill the emerging "pension gap" that is being generated by the gradually declining generosity of the public pay-as-you-go pensions in response to population aging. This paper investigates how the uptake of the recently introduced "Riester pensions" depends on the state-provided saving incentives and how well the targeting to families and low-income households has worked in practice. It documents the costs of the scheme, and collects circumstantial evidence on displacement effects between saving for old-age provision and other purposes.\n\nAfter a slow start and several design changes, Riester pension plans took off very quickly. While saving incentives were effective in reaching parents, they were somewhat less successful in attracting low-income earners, although Riester pensions exhibit a more equal pattern by income than occupational pensions and unsubsidized private pension plans. Riester pension savings totaled €9.4bn in 2010 with an associated cost of €3.5bn. One average one Euro of subsidies is thus associated with 2 Euros of households' own Riester saving.\n\nThere is no evidence that Riester pensions have crowded out other saving. While households who plan to purchase housing and who attach high importance to a bequest motive are less likely to have a Riester pension, several regression results show that occupational pensions and other forms of private pensions act as complements rather than as substitutes. Aggregate national saving has increased since the introduction of Riester pensions.
Keywords: Riester pensions; Germany; pension reform; saving incentives; low-income households
JEL Codes: D14; D91; H31; H55
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| state-provided saving incentives (H55) | uptake of riester pensions (G23) |
| uptake of riester pensions (G23) | household saving behaviors (D14) |
| simplification of the application process in 2005 (C42) | uptake of riester pensions (G23) |
| state-provided saving incentives (H55) | uptake of riester pensions among families with children (G52) |
| targeting of low-income households (H53) | uptake of riester pensions among low-income households (G52) |
| riester pensions (H55) | other saving instruments (D14) |
| riester pensions (H55) | aggregate national saving (E21) |