GERMANY - BVI, the German investment federation, has unveiled proposals for investment fund-based occupational pensions which could lead to further individualism of the second pillar. But the pension fund association aba has warned it is sceptical of the new idea.

The BVI revealed plans earlier this week, during its presentation of the 2009 investment industry figures, for its bid to boost the use of investment funds in occupational pensions. Similar to the 'direktversicherung', where employers arrange life insurance contracts for their employees, the BVI suggested companies could offer their staff a 'direktfondsrente' and put money directly into investment funds.

Employees have had the right to demand an occupational pension scheme from their employer since 2002, providing they contribute part of their salary to it.

The employer then chooses one of the five possibilities for a pension plan, which can include a Pensionskasse, Pensionsfonds, Unterstützungskasse or placing pension liabilities on the company's balance sheet (sometimes funded via a CTA). It then signs a contract with one, or is often the case with large companies, or more than one provider. (See earlier IPE story: Info boosts pensions over contributions - German study)

The BVI proposals are just an idea at the moment and no further details have been revealed aside from a minimum guarantee which the investment company would have to offer.

In response to the BVI proposal, Klaus Stiefermann, head of the working group for occupational pensions, aba, told IPE: "We fear that the original concept of ensuring a sufficient supplementary retirement provision - with one pension scheme for all employees of a company - will suffer with the trend towards more individualism."

He argued yet another way to save for retirement could confuse many people even more, and noted earlier attempts to introduce a personal accounts pensions model has met with little interest in Germany.

"When employees can decide on their own contributions they might opt out of holding additional insurance policies such as cover for incapacity to work, or they might choose very flexible contribution payments without taking personal risks into consideration," said Stiefermann.

He also claimed increased pensions individualism would lead to more administrative work.  

Aba fears another threat to occupational pensions is a bill tabled to change the regulations around the share-ownership of their own companies by employees.

This model will become more attractive taxwise and could be more attactive in many cases than contributions to an occupational pension scheme, according to aba, which might lead people to take their money out of pensions.

The bill is scheduled to pass through parliament on 5 March, as part of a package which includes changes to the third pillar Riester-Rente, to meet a ruling by the European Courts of Justice. (See earlier IPE story: German BMF accepts ECJ ruling on Riester)

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