Maurer, RaimondMitchell, Olivia SRogalla, Ralph2023-05-232023-05-232008-07-012019-08-06https://repository.upenn.edu/handle/20.500.14332/43652We analyze the risks and rewards of moving from an unfunded defined benefit pension system to a funded plan for civil servants in Germany, allowing for alternative portfolio mixes using a Monte Carlo framework and a Conditional Value at Risk metric. First, we estimate contributions as a percent of salary that would fully fund future benefit promises for active employees. Second, we identify an investment strategy for plan assets that will minimize worst-case pension costs; this turns out to be 22% in equities, 47% in bonds, and 30% in real estate. Third, we explore the time path of pension fund asset shortfalls and the chances of contribution holidays for current and future generations. We show that moving toward a funded pension system for German civil servants can be beneficial to both taxpayers and civil servants.© 2008 Pension Research Council of the Wharton School of the University of Pennsylvania. All rights reserved.EconomicsWorking Paper