Population Ageing and Future Demand for Old-Age and Disability Pensions in Germany – A Probabilistic Approach

Industrialised economies are experiencing a decline in mortality alongside low fertility rates – situation that puts social security systems under severe pressure. Population ageing is associated not only with longer periods of pension claims but also smaller cohorts eventually entering the labour market. This threatens sustainability pay-as-you-go for implementing or further improving appropriate reform measures; adequate forecasts future population structure needed.
 We propose probabilistic approach to forecast number pensions Germany up 2040. Our model considers trends development, force participation, and early retirement, as well effects reforms. Principal component analysis used manage high degree complexity involved forecasting old-age disability claims, which arises because cross-correlations between rates, different age groups, gender. Time series methods enable inclusion autocorrelations rate time model. Monte Carlo simulation quantify risk. The latter an important feature our model, development and, eventually, financial burden resulting from those highly stochastic.
 predicts that, median trajectory, will increase by almost 5 million 2017 2036, increases 2036. These numbers take account legal retirement ages part 2007 reform. After mid-2030s, however, moderate decrease can be expected. results show clear need reforms, especially medium term.