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German state pension drops below OECD average

GERMANY - The maximum state pension benefit in Germany will fall below the average for 30 OECD countries because of government reforms enacted earlier this century, according to a new study by the Organisation for Economic Cooperation and Development (OECD).

The review found the maximum future benefit for a 20-year-old German worker with an average income will equal 39.9% of previous salary, but this compares with an average of 58.7% for 20-year-old workers in the other OECD countries, the study said.

In both cases, pension contributions spanning 45 years and an average income of €41,046 per annum were assumed.

But the report also states a 20-year-old German worker would have a pension benefit equalling 56% if they signed up to the so-called "Riester-Rente" - a government-subsidised private pension.

For those holding Riester pensions for just 25 or 35 years, benefits would equal 47.5% and 51.4% respectively, the study said.

"Following the enactment of reforms in the past years, Germany has done much to put its state pensions scheme on sustainable footing," commented Monika Queisser, an OECD expert who co-authored the study.

"But workers will need to save privately for retirement to get a pension that is equivalent to that for the OECD," she added.

According to Queisser, the future gap between the German state pension and the OECD average will be particularly significant for low-income German workers.

"Germany should pay particular attention to the effect its pension reforms will have on lower income workers and remain vigilant in combating an increase in old-age poverty," she said.

The German government has previously said following major pension reforms in 2001 and 2004, the maximum benefit would fall to 43% of previous salary from 2030 from just above 50% now.

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