Fewer and fewer young Germans are saving for retirement

Klaus Hurrelmann and Christian Traxler present results of 2019 MetallRente study.

The number of Germans between the ages of 17 and 27 who are saving for retirement has fallen by seven percent in the last nine years, according to the 2019 study, “Youth, Savings, Finances”, published every three years by the German metalworkers’ pension fund MetallRente under the direction of Hertie School Professor of Health Education Klaus Hurrelmann and Professor of Economics Christian Traxler, alongside Metallrente CEO Heribert Karch.

The latest survey, published on 6 May, confirms that the share of young people saving for retirement is declining. While 55 percent saved for retirement in 2010, only 48 percent do so today.

Two-thirds of those surveyed said they fear their pension will be so small that they may fall into old-age poverty. Yet a large majority is also convinced that a solid old-age pension is possible if policymakers create the right conditions. “We simply cannot stand by and watch as young people turn away and the trust of an entire generation is lost. Enough time has been wasted already,” said Klaus Hurrelmann.

Lack of information on saving options

The study further reveals that young people seem to have little understanding of the saving tools available to them and of the implications for old-age security. Less than a third of those surveyed said they were well-informed about the subject of retirement savings, while 92 percent said they would like information that is easier to understand, either through educational programmes in schools or through online portals designed specifically for young people.

The study reveals a contradictory picture, says Christian Traxler. “On the one hand, nearly every second young adult says they want to live in the ‘here and now’, and the share of those who see old-age security as a reason to save is declining. Nevertheless, they seem to be clearly aware of the problem.”

One way to encourage young people to save is to institute automatic enrolment in work-based savings plans, an idea that a majority of those surveyed said they would favour. Workers would have the choice to opt out of the plan, but would have to take steps to do so, rather than opting-in, as is currently the case.

Precarious outlook for young women

The outlook for young women to save enough money for a secure retirement is particularly precarious, the study showed. Around three-quarters say they expect to work part-time at some point in their lives, due mainly to care-giving responsibilities for family members, while only four in 10 young men expect to do so. The less a person works, the less they pay into the state pension system and the less disposable income they have to invest in private plans as well.

Young men also invest much more frequently in shares and investment funds, at 35 percent, compared to only 18 percent of young women. Despite their comparatively higher risk than bonds or interest-based savings, such instruments historically have often provided higher returns with relatively moderate risk when held over the long-run.

Read more about the study here.