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Study: Effects of the Corona pandemic on pensions

The corona pandemic will place a much greater burden on contributors in the future, while the level of security for pensioners will rise. This is the conclusion of current calculations by the Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy (MPISOC). The paper was written in collaboration with Axel Börsch-Supan, Professor at the TUM School of Management for the Economics of Aging and Director of the Munich Center for the Economics of Aging at MPISOC and Dr. Johannes Rausch of the MPISOC.

Prof.Börsch-Supan, (c)Jan Roeder, MEA

The developments around Covid-19 will, like the financial crisis in 2008, have a significant impact on the statutory pension insurance. According to the results of the study, the burden on contributors will increase in one to two years. Annual wages are likely to fall, while pension levels are expected to rise in 2021 – all the more so, the deeper the recession.

“Pensioners will therefore be less affected financially by the corona crisis than the working population,” explains Prof. Axel Börsch-Supan, who has held the chair of “Economics of Aging” at the TUM School of Mangement since 2012.

The increase in the contribution rate, which currently stands at 18.6 percent, would be limited to 20 percent by the “double stop line” valid until 2025. However, this stop line will probably be reached as early as 2021, unless the recession lasts only for a very short time.  Otherwise, without the corona pandemic, the scenario described would have occurred much later – in 2025. This also likely means additional costs for the federal government.

Details of the calculations and the different scenarios can be found here in the MEA Discussion Paper 11-2020.

For the complete press release of the Max Planck Institute for Social Law and Social Policy click here.

The post Study: Effects of the Corona pandemic on pensions appeared first on Technical University of Munich – School of Management.

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