A Retirement Adequacy Index for Germany

The goal of the project is to develop an index to measure the adequacy of overall retirement provision for the working-age population. The Retirement Adequacy Index is intended to regularly inform about the state of retirement provision. In the project, we also aim to place a particular emphasis on the gender perspective. Policy has initiated a shift toward a multi-pillar system with a stronger role for private and occupational pensions. This makes it all the more important, for social policy assessment, to consider all pillars of retirement provision.
The goal of the Retirement Adequacy Index is to regularly report on the overall retirement provision of individuals of working age. It is central that the index reflects the heterogeneity of the population. The index aims to estimate the share of people at risk of not being able to maintain their standard of living in retirement. The focus is therefore not only on old-age poverty, but on whether individuals can maintain their consumption level upon entering retirement.
To achieve this, besides defining a target replacement rate—i.e., the level at which income in retirement is considered sufficient to maintain the consumption level—two key prerequisites are needed. First, a regularly updated data basis on retirement assets in the population, which must include not only statutory pension entitlements but also private pension assets and all other security systems in the household context. Second, a model for regularly estimating future retirement incomes of the working-age population.
Unlike studies that focus only once on specific aspects of income development in old age, the Retirement Adequacy Index allows for regular reporting on this topic with high recognizability. Once developed, the index enables timely incorporation of new data and reflection of policy changes.