That’s how rich pensioners really are in Germany

A large part of the population is afraid of poverty in old age. A study by the German Economic Institute commissioned by the Bertelsmann Foundation shows that the poverty risk rate is often significantly overestimated. In addition to income, this also takes into account the pensioners’ assets.

Half of Germans are afraid of poverty in old age

According to the federal government, anyone who earns less than 14,109 euros annually in Germany is considered to be at risk of poverty. In 2021, according to Statista and the Federal Employment Agency, 20.7 percent in the Federal Republic of Germany were affected by poverty or social exclusion. Additionally, this is German Pension system heavily criticized because a decreasing number of employed people have to finance more and more pensions. It is no wonder that large proportions of the population fear possible poverty in old age.

A study by the survey institute YouGov, which was published in May 2023 and refers to data collected from the end of April to the beginning of May 2023, shows that around 49 percent of men and 56 percent of women fear poverty in old age.

An evaluation by the Federal Statistical Office added to this finding that women in Germany are also significantly more at risk of poverty in old age. The reasons for this are lower average incomes for women, breaks in working life and more frequent part-time employment compared to men.

In 2022, the average net pension from statutory pension insurance for men was 1,276 euros. The corresponding pension for women was slightly lower at 1,060 euros. The German Institute for Economic Research came to these results.

IW study takes pensioners’ assets into account

Now a lot of such studies only look at people’s income. However, the German Economic Institute also takes assets into account in its 2019 study. During the calculation, the pensioners’ assets were converted into annuities and equated with income. According to the IW, citizens’ financial well-being depends not only on their own income, but also on the assets they own. Since this age is often significantly higher than that of the younger generation, seniors often appear poorer than they really are, according to the FAZ. According to the IW, the lack of consideration of pensioners’ assets often leads to an exaggeration of the risk of poverty: in the combined calculation, only 9.9 percent of people over 65 fall into the category of the relatively poor, which is around 1.75 million corresponds to pensioners. Without taking assets into account, the calculated poverty rate was still around 12.5 percent.

Partner income is often not taken into account

According to economist Maximilian Stockhausen, another reason for poverty exaggeration can be that the income of the respective life partner is ignored in the numerous published studies, as the co-designer of the IW wealth study explains in an interview with the IW information service. It may be that a partner who, for example, was responsible for raising children or who worked in a job with only minimal pay does not have to fear poverty in old age, despite the resulting low pension. Many low-income earners have partners who can provide enough income for both parties in old age. Nevertheless, seniors with low pensions and no risk of poverty are included in the poverty statistics.

Criticism of the IW study

But there are also some critics of the institute’s published study. They criticize that assets cannot be assumed to be liquid and therefore directly accessible. Stockhausen can understand these accusations, but emphasizes that the assumptions made about liquid assets are still relevant: “It is quite realistic that a household will sell at least some of its assets and use the money if it gets into financial problems,” explains the economist .

Editorial team