In response to population aging, pay-as-you-go pensions are being reduced in almost all developed countries. In many countries, governments aim to fill the resulting gap with subsidized private pensions. This paper exploits the recent German pension reform to shed new light on the uptake of voluntary, but heavily subsidized private pension schemes. Specifically, we investigate how the uptake of the recently introduced 'Riester pensions' depends on state-provided saving incentives, and how well the targeting at families and low-income households works in practice.We show that, after a slow start, private pension plans took off very quickly. While saving incentives were effective in reaching parents, they were less successful in attracting low-income earners, although Riester pensions exhibit a more equal pattern by income than occupational pensions and unsubsidized private pension plans.We also provide circumstantial evidence on displacement effects between saving for old-age provision and other purposes. Households who plan to purchase housing are less likely to have a Riester pension. The same holds for households who attach high importance to a bequest motive. Occupational pensions and other forms of private pensions, however, act as complements rather than as substitutes.

Intergenerational support exchanges are of particular interest in Europe's ageing populations. This paper focuses on the relationship between private and public financial transfers to and from the elderly. Based on German data we find that the giving of private transfers is influenced by public transfers. The close link between public transfers to the elderly and the financial support they give to others represents an inefficient backflow of pay-as-you-go financed pensions to the young generation. This mechanism can be interpreted as a private compensation device for the generations. We can also show that at the same time the receipt of public transfers by the elderly crowd-out private financial support they would have received otherwise in the German welfare state.

Pay-as-you-go pension systems provide insurance against longevity-related old-age poverty and related risks. They are commonly also used as instruments for redistribution. This paper provides several estimates of the insurance and transfer share of the German public pension system. Estimating these shares is important because they are indicative of taxation-related deadweight losses and in¯uence public acceptance of the pension system. We also disentangle intragenerational from intergenerational transfers. Although our estimate of intragenerational transfers is smaller than recent semi-of®cial estimations, such transfers create substantial deadweight losses. Intergenerational transfers are much larger, thereby contributing to strong negative participation incentives for the younger generation.

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