Let's talk about vaccination. Sure, most people are probably sick of the topic by now. But the failed vaccination strategy is a wonderful illustrative object if you want to understand what has been driving politicians to make the wrong decisions for years and how they could do better. While high vaccination rates have already been achieved in the UK and the USA, this figure is just over ten percent in continental Europe, and the next lockdown is just around the corner. While the Anglo-Saxon countries are acting strategically and consciously taking risks, the EU (and Germany too) are being driven by voters' supposed desire for safety and austerity. In Germany in particular, politicians are making this mistake time and time again, whether it's the botched construction of the capital's BER airport or the failed rent cap in Berlin.

The most glaring example of this approach is the situation of funded pension provision in Germany. Due to the tax situation in this country, citizens are more reliant than in almost any other country on the state to help them accumulate private assets. It tries to do this with models such as the Riester pension. However, these and comparable pension products suffer from one problem: due to the guarantee provisions, insurers have to invest in supposedly safe, but also less profitable asset classes, such as government bonds.

This is due to the capital market theory. This theory states that forms of investment with higher returns also entail a higher risk. Our data analyses show that this is also true in the short term. If we only look at one-year periods, equities, for example, have a higher return than government bonds, but also a higher risk.
However, these one-year periods are not relevant for retirement provision, as people invest their money for much longer.

Let's compare the returns and risk of equities over a ten-year period: Equities continue to have a higher return, but now they also have a lower risk than bonds. Pensions would by no means be insecure if funded pensions were to rely on equities instead of supposedly less risky securities.

Other countries have long recognized the potential of reformed pension provision. Sweden, for example, whose equity-based pension product AP7 is the largest and for years the most profitable equity fund in Europe. Politicians there have strategically analyzed risk and return, just as the UK and the USA have done with the vaccine. German politicians would therefore even have a role model to follow, but apart from individual initiatives, not much has happened in this area so far.
It is to be hoped that voters have now realized how misguided the local political approach is in light of the experience with the vaccination campaign and will finally push for an overdue reform of funded pension provision.