Capital-Funded Pension Provision in Germany: Designing a Public Pension Fund for Long-Term Sustainability

Germany’s statutory pension insurance is predominantly pay-as-you-go, making its financing sensitive to demographic change, domestic employment and wage developments. This article examines under which institutional and financial conditions a publicly governed, capital-funded supplementary pension fund—the proposed Deutschland-Rentenfonds—could diversify pension financing without transferring disproportionate market or fiscal risks to contributors. It develops a transparent partial framework for accumulation, portfolio allocation and sustainable withdrawals. The analysis considers staged contributions of 0.5–2.0% of gross earnings, global diversification, low-cost passive investment and a life-cycle allocation. Three illustrative nominal return scenarios of 3%, 5% and 6% are examined using the assumptions documented in Baumert (2026). The model reports a fund-financing share of approximately 8.1% of pension expenditure by 2050 in a baseline scenario and approximately 11.5% in a favourable scenario; these figures are treated as model outputs rather than verified forecasts. The results indicate that capital funding can diversify revenue sources, but cannot eliminate demographic, inflation or market risk. The decisive safeguards are independent governance, a statutory cost ceiling, transparent withdrawal rules, risk-reducing portfolio management and explicit treatment of start-up financing. A public fund should therefore supplement rather than replace Germany’s statutory pay-as-you-go pension.