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German pension system ranked 26th best in the world

German pension system ranked 26th best in the world

With the number of people in retirement expected to double within the next 30 years, pension systems across the world are coming under increasing pressure - and some countries are handling it better than others, according to the latest Allianz Global Pension Report. Germany ranks somewhere in the upper midfield. 

The Allianz Global Pension Report 2020

Global life expectancy has never been so high. Experts predict that it will increase by a further four years by the middle of the century. A positive development, certainly, but it brings with it a problem: most countries’ pension systems are nowhere near up to the task of dealing with the increased number of retirees. 

This is the main finding of the Global Pension Report, published this week by Allianz. The insurance group’s experts examined the pension systems and framework conditions in 70 countries worldwide to determine whether, on the one hand, they ensure an adequate retirement subsistence and, at the same time, are financially sustainable. 

The report’s authors investigated each country’s pension system on the basis of 30 different parameters, which were each graded on a scale from 1 to 7: 

  • Financial and demographic starting point - How old is the population already, and how will it continue to age until 2050?
  • Sustainability - Is the system well-prepared for increasing loads? How long is the average retirement, and how long must people have paid into the system beforehand?
  • Adequacy - Does the pension system provide a decent income for as many old people as possible? 

Germany behind Sweden, Belgium and Denmark on pensions

Sweden, Belgium and Denmark - countries which are often hailed as role models for pension reforms - come out on top in the 2020 report, as the three best pension systems in the world. Germany, on the other hand, achieved 26th place. 

The forerunners in this study - as in most other pension rankings - all combine pay-as-you-go financing and capital investment. Sweden, for instance, obliges its savers to invest part of their pension provision in either a state-managed fund or riskier stocks. In Denmark and the Netherlands, everyone receives the same basic pension - regardless of their prior income - and then supplements it with occupational and private pensions, mainly on the capital market. 

While it also combines state, occupational and private pensions, the German pension system does not allow for a uniform pension for everyone; neither does it invest state pension contributions in a governmental fund like in Sweden. 

While Germany ranked relatively well on adequacy (3,01) and sustainability (3,52), it fell down on its financial and demographic starting point - with a higher number of old people, relatively few young people and high government spending on pensions, Germany was one of the 15 countries with the worst starting point. 

The countries with the best pension systems in the world 2020

The top 26 countries with the best pension systems in this year’s report were as follows:

  • 1. Sweden
  • 2. Belgium
  • 3. Denmark
  • 4. New Zealand
  • 5. USA
  • 6. Australia
  • 7. The Netherlands
  • 8. Norway
  • 9. Bulgaria
  • 10. Canada
  • 11. China
  • 12. Czechia
  • 13. Latvia
  • 14. Ireland
  • 15. Luxembourg
  • 16. UK
  • 17. Slovakia
  • 18. Italy
  • 19. Taiwan
  • 20. Kazakhstan
  • 21. Finland
  • 22. Israel
  • 23. Switzerland
  • 24. Japan
  • 25. Estonia
  • 26. Germany

For the full ranking, including detailed information on how the scores are calculated, read the full Allianz Global Pension Report 2020.

Abi

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Abi Carter

Abi studied History & German at the University of Manchester. She has since worked as a writer, editor and content marketeer, but still has a soft spot for museums, castles...

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