Financial literacy, Riester pensions, and other private old age provision in Germany

Financial knowledge is not wide spread in Germany. In that respect we confirm results found for other countries, like the United States and the Netherlands. Women, those with low education and low income, as well as households in east Germany are at risk of having low financial literacy. In 2001 a state subsidized private pension scheme (Riester pensions) was introduced in Germany. The central question is, Are Riester pensions successful at encouraging individuals with low financial literacy to save privately for old age? Our results indicate that financial literacy is positively related to privately saving for retirement independent of state subsidies. Levels of private coverage are particularly low among individuals in the lowest income quartile, who would profit most from the state subsidies. At the same time they show the lowest levels of financial literacy