Comparing Analysis of U.S. and Germany Pension System Reform

It has been more than 20 years since the World Bank’s influential report suggested a pension reform and a multi-pillar system for the provision of old-age income security. However, not all countries’ attempts toward such goals are met by success. The U.S.’s pension system reform was wildly regarded as successful, while Germany’s reform has made little impact. In this paper, I examined the pension system reforms of the U.S. and Germany along with its demographic background. We can conclude that a country’s demographic decomposition, particularly its aging population ratio, plays a critical role in pension reform as it affects the pension fund’s risk appetite thus the pension’s return rate, as well as capital market development.

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