Chapter

Reforming the German Civil Servant Pension Plan

Raimond Maurer, Olivia S. Mitchell and Ralph Rogalla

in The Future of Public Employee Retirement Systems

Published in print August 2009 | ISBN: 9780199573349
Published online February 2010 | e-ISBN: 9780191721946 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199573349.003.0009
Reforming the German Civil Servant Pension Plan

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This chapter analyzes the risks and rewards of moving from an unfunded defined benefit pension system to a funded plan for civil servants in Germany, allowing for alternative portfolio mixes using a Monte Carlo framework and a Conditional Value at Risk metric. The authors identify an investment strategy for plan assets that will minimize worst-case pension costs; this turns out to be 22 percent in equities, 47 percent in bonds, and 31 percent in real estate. The authors show that moving toward a funded pension system for German civil servants can be beneficial to both taxpayers and civil servants.

Keywords: public pension asset allocation; asset–liability modeling; civil servant pensions; conditional value-at-risk; public pension contributions; Deterministic Actuarial Valuation; discount rates; public plan funding ratio; Germany; Monte Carlo methods; Pension Benefit Obligation; Stochastic Asset Model; Vector Autoregressive Model

Chapter.  11443 words.  Illustrated.

Subjects: Public Management and Administration

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