Regional purchasing
power of pensions

In which regions of Germany do pensioners get a lot for their money and where has life in old age become more expensive than average? On behalf of the German Insurance Association (GDV), Prognos investigated the regional purchasing power of pensions. 

Higher pensions and lower prices in the East 

The analysis reveals clear regional differences, both in terms of prices but also in terms of actual pension purchasing power. The key findings of the short study are:

• There is a pronounced urban-rural gap: In cities, life is much more expensive than in the countryside.
• The price level in East Germany tends to be lower than in the West of the Republic, so there is also a West-East gap.
• On average, pensions in East Germany are noticeably higher than in West Germany.
• How much pensioners can afford with their money (pension purchasing power) therefore differs greatly.
• In the East, high pensions tend to meet low prices, so pension purchasing power is higher than in the West – especially in metropolitan areas where relatively low pension payments and high prices meet. 

Inflation, higher energy prices and housing costs are driving up the cost of living. This is one of the reasons that private retirement provision is becoming more necessary in order for people to maintain the standard of living they have become accustomed to in old age. This is especially true (but not only) in places, such as cities, where people tend to receive a lower pension, but where the cost of living is high. 

Our approach

The study is based on an analysis of living costs and retirement income.

• For the purposes of the study, the cost of living is approximated based on the cost of housing. This is suitable as a proxy for two reasons. Firstly, at around 30%, “housing” accounts for a large proportion of private households' expenditure. Secondly, studies repeatedly show that regional prices differ particularly in the area of housing costs and less so in the area of goods and services.
• Retirement income is represented by the average pension amounts at regional level. In addition to the price level differences, the income differences of people in retirement (approximately) are thus recorded. It is the interplay of both these elements that results in regional pension purchasing power.

This short study is based on Prognos’ 2019 “Regional costs of retirement provision” study. It comprehensively analysed the regional factors that influence the costs of retirement provision. The new study focuses more specifically on the aspect of regional purchasing power and extends the so-far static view to also consider the situation over time. The aim was to identify regions in Germany where retirement is particularly cheap or expensive. The results will be used to derive information on pension requirements.

Links and downloads

To the study (GDV website, in German)

Q&A on the study (in German)

Project team: Leilah Dismond, Dr Oliver Ehrentraut, Dr Stefan Moog

Latest update: 09.01.2024