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ABA challenges Riester on deferred compensation

GERMANY- The ABA, the German Occupational Pensions Association, has called on labour minister Walter Riester to defer his plans to scrap deferred compensation in 2008.

Speaking at the association’s annual conference in Bonn, the chairman of the ABA Boy-Jurgen Andresen, said he would prefer to see the deferred compensation scheme, whereby employees choose to have the money they would receive in pay rises held for future use, remain in place since it benefits both employer and employee from a tax perspective. It is also a form of instant saving.

Speaking at the conference Riester argued that deferred compensation has an impact on the country’s national insurance system, since taking deferred compensation meant fewer national insurance contributions.

However, Andresen felt Riester’s argument is somewhat misfounded: “there may well be some truth in this but you cannot fix the problem of the health service with money in occupational pension schemes.”

Andresen pointed out that the chemical workers’ agreement only runs until 2007 and if deferred compensation is not available thereafter, it is possible the agreement will not be renewed. “This makes longer term planning difficult,” he added.

Elsewhere, Andresen called on the government to speed up the process by which the BAV gives statutory approval to the new industry-wide pension schemes.

“We finally have BAV approval for the chemical sector’s scheme, but we need to speed up the process so others can get off the ground. Some 15 million workers stand to benefit from the new schemes but we need the first batch up and running so that future ones have a structure to build on,” he said.

Andresen says there has been some progress in this respect since Riester has invited the ABA to meet with himself and finance minister Hans Eichel to discuss the issues directly. This is the first time that the ABA has been involved discussions at the federal ministry level.

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