PENSIM Project

The simulation model MEA-PENSIM depicts the statutory pension system including all key determinants and is structured in such a way that pension reforms can be easily implemented. The model calculations are based on a detailed income and expenditure calculation of the German statutory pension insurance system. The calculation of these amounts as well as the projection of the contribution rate and the pension level require assumptions regarding the development of the population and the labor market, whereby the development of the labor market depends on the population forecast.

The population projection requires assumptions regarding the future development of life expectancy at the time of birth, future net (im)migration and the future fertility of women. The labor market is determined by multiplying the population by the German employment rates. MEA-PENSIM differentiates between men and women, age and between the new and old federal states. The latter is necessary as the statutory pension insurance evaluates work in the old federal states differently to work in the new federal states until 2024. The age structure of the employment rates is taken from the German microcensus, while the total employment rates are taken from the national accounts. The employment rates can be varied for the future. The number of unemployed, (compulsorily insured) employees, self-employed and civil servants is determined using (variable) age-specific rates based on the working population.

Subsequently, the number of pensioners is calculated. MEA-PENSIM takes into account a retirement period from age 51 to age 80. In this retirement period, the number of pensioners of a certain age depends on the retirement behavior of the population. It is assumed that the time of leaving the labor market coincides with the time of first drawing a statutory pension. Based on this assumption, MEA-PENSIM contains two methods for calculating and adjusting the retirement behavior of compulsorily insured individuals. The first method calculates the share of pensioners in the total population based on the decline in the share of compulsorily insured individuals in the population since the age of 50. The second method reverses the procedure just presented and is based on assumptions about the future development of the retirement behavior of compulsorily insured individuals.

Following the labor market projection, MEA-PENSIM continues with the projection of wages and salaries. Their projection is based on exogenously specified growth rates. With the development of wages and salaries, all the necessary information is finally available to project the development of the most important determinants of statutory pension insurance and to simulate the effects of pension reforms.

MEA-PENSIM is currently being expanded to include the other branches of German social insurance (statutory health insurance, social long-term care insurance) as part of the BB-Future project.