Demographic challenges in the FRG

The German pension scheme was seen as exemplary for a long time, since the insurance mechanisms were continually strengthened during its history. However, the demographic changes that became perceptible slowly but steadily exposed a very crucial weakness: The pay-as-you-go system, often also called a contract between generations. Since the German population grows older and older, the burden of financing pensions gets heavier and heavier to carry for the fewer and fewer people in gainful employment. Dramatic predictions according to which a perpetuation of the current system would soon mean one working individual will have to come up for the pensions of several retirees make for amazement and shock. Not to mention that those terribly burdened working people of today can assume that they themselves will get little or no pension during old age.

The age structure of the Federal Republic of Germany in 2008 and the projected age distribution for the year 2050 show a significant shift towards the group 65+, caused by advances in medicine and the decline in birth rates since the seventies. Currently the birth rate in Germany is only 1.4 children per woman.

Even though the current demographic change in Germany was already predicable in the 1980s, no important changes that would have compensated for this circumstance well enough were made to the German pension scheme.

Today, for this reason, Germans cannot count solely on the lawful pension nowadays. In politics, a triple-support system that still views lawful pensions as a basis, but points to the possibilities of operational and private retirement provision as replenishment.