Aba, Germany’s occupational pensions association, will prepare concrete proposals in the coming months to reform certain aspects of the country’s second-pillar pension system and submit them to the government, managing director Klaus Stiefermann told IPE.
The association will push on three main points that it believes are essential to further boost occupational pensions in Germany.
Pure defined contribution (DC) pension schemes, introduced by law to strengthen occupational pensions (Betriebsrentenstärkungsgesetz), have so far not lived up to expectations, with two realistic collective bargaining agreements on the table – one paused by BaFin (Talanx/Ver.di) and the other in the chemical industry set to start in October.
Aba is proposing the possibility of social partners to sign collective bargaining agreements, necessary to start pure DC plans, also at company level.
Negotiating bargaining agreements between employee and employer representatives, beyond companies and their internal structures, represents a hurdle, according to Aba.
Moreover, Stiefermann explained, the Betriebsrentenstärkungsgesetz has introduced the BAV-Förderbetrag, a government subsidy for low-earners’ employers making additional contributions to company pension schemes.
“The amount of the subsidy is 30% of the employer’s contribution. An increase to 50% would further promote incentives for company pension commitments for low earners,” Stiefermann said.
The other two measures to reform occupational pensions, according to Aba, include the possibility of employers offering pension promises with a level of guarantee on the contribution paid of below 100%, and to amend commitments already made for the future.
“It is not a question of reducing occupational pensions; pension components already earned must be retained […] For the working years ahead, however, occupational pensions for employees should be more promising and more generationally appropriate by means of pure defined contribution plans,” Stiefermann said.
Aba will also request the government to up the limit for contributions in the EET system for Pensionskassen, Pensionsfonds and Direct Insurance Schemes, currently at €7,000 per year, and allow companies with direct promises on the books to discount them at an interest rate below the current 6%.
Contributions to statutory health and long-term care insurance payable on company pensions are high, according to the association, and this needs a review, Aba said, adding that it is also necessary to relieve small and large pension funds from an excess of regulations.
“Overregulation can be found in all supervised forms of occupational pension provision. For this reason, the upcoming review of the IORP II directive should lead to less and not to additional burdens for occupational pensions,” Stiefermann said.
Occupational pension reforms in 2023
The coalition agreement signed by the Social Democrats (SPD), the Greens and the Liberal Party (FDP) plans to strengthen occupational pensions.
The German government wants to allow investment opportunities with higher returns, and intends to mobilise private capital from institutional investors, including insurance companies and pension funds, to finance start-ups.
It also intends to support the implementation of pure DC plans designed via collective bargaining agreements and managed by the social partners.
“Aba hopes that its proposals will be taken up by the government in 2023. This year, statutory pensions will be the focus of pension reform policy. After that, the government will turn its attention to occupational and individual pensions,” Stiefermann said.
The government coalition also plans to reform the third-pillar private pensions, setting up a public fund offering a “cost-effective” product with the possibility to opt-out.
“Aba is very concerned about the current discussion to centralise funded pension provisions by establishing a quasi-mandatory sovereign wealth fund,” Stiefermann said, adding that there is a lack of transparency on the costs of such funds, while the administrative burden is shifted to employers.