GERMANY - Employers offering attractive pension schemes will have advantages in the labour market but pension schemes should not be compulsory, says Wolfgang Malchow, managing director of industrial group Robert Bosch.

"Company pension schemes exist through the motivation, energy and creativity the employers summon up for their employees," Malchow told the annual meeting of the German association of company pension schemes, or ABA, in Bonn today.

But making pension funds for employees obligatory would be "a big mistake".

"In contrast only the path of motivation, incentives and voluntariness can have success," he said, explaining that transparency, flexibility, sustainability and predictability should be the pivots of company pension schemes.

"In view of longer life span, the costs of pension provision is clearly increasing," he said, adding: "But in spite of all this economic basic conditions we need company pension schemes more than ever."

The problem of pension provision had "raised the awareness of the meaning of safeguarding one’s old age among the people and our workers".

Pension schemes would have to adapt to determined standards and should be adequate to social basic rules.

Malchow introduced the concept of a "direct commitment" model, or "direktzusage". This would encourage employers to combine contributions and economic influences in "a sensible manner".

A further development of pension funds was also put forward, but he added that the remuneration framework must be urgently broadened.

"The Pensionsfond model has been so far unsuitable for the pension fund financed by the employer." It would also help to develop further the Insolvenzsicherung, or insolvency insurance.