The main reasons for this are demographic change and increased life expectancy among citizens. However, by deliberately ignoring these two factors, most citizens lulled themselves into a false sense of financial security regarding their retirement. A steadily growing number of retirees is being offset by a shrinking workforce. Reserves were not created in the pension system because it was mistakenly assumed that there would always be enough children. In fact, birth rates have been declining for decades, and there is hardly any area in which politics has failed as badly as in population policy.
Other countries were smarter. They have known for decades that money can work for you. Where sufficient reserves were built up, investment income is now replacing the pension contributions that are lacking for demographic reasons. Countries that invested their reserves in tangible assets were particularly astute. Among tangible assets, investing in companies—i.e., stocks—has proven to be the wisest form of investment. Countries whose funded pension systems were heavily invested in stocks are now in a much better position than their neighbors, who were told by the highest authorities that stocks were too risky. We Germans, as is well known, can sing a special song about this. It is part of German financial market wisdom that stocks are too speculative for the population. It is astonishing how popular savings accounts still are.
But what does the word “risk” actually mean? The inappropriate equation of price fluctuations with risk has in any case led to an enormous economic misallocation of financial assets. And the consequences for national wealth, pensions, and prosperity are now devastating. But it is now impossible to make up for what has been missed over decades. Worse still, the situation with health and long-term care insurance is far more precarious than that of pensions in view of demographic change.
It would have been decent, at least, if our government had allowed its citizens to make private pension provisions through share savings. This would have been easy if Berlin had only paid attention to the approach taken in other countries. Deferred taxation of capital gains and a low tax rate would have been a blessing for many citizens. In addition, the abolition of the imputation procedure in 2000 and the abolition of the one-year speculation period in 2009 made stock investments much less attractive.
Today, we read in the newspapers that working life must be extended and public holidays abolished. The argument is: “It cannot be right that a third of adult life is spent in retirement.”
Clear-sighted individuals will have long been aware that Germany was and is by no means only confused in the area of defense.
Sincerely yours,
Fund managers and co-investors
Dr. Christoph Bruns Ufuk Boydak
Chicago, Frankfurt a.M. on July 31, 2025