GERMANY - The German pension fund association aba has thrown its support behind government plans to top up the minimum pensions of Germans who have saved in both the first and the second pillars.

Following a proposal for a 'top-up pension' (Zuschussrente) tabled by labour minister Ursula van der Leyen, Germans whose pension is less than €850 should get a top-up if they have paid into the first pillar long enough and also saved in the second pillar.

Speaking at the aba's recent annual conference in Stuttgart, Heribert Karch, head of the organisation, said the Zuschussrente could be a "motivation" for people to save in the second pillar.

The proposal aims to support mainly mothers who "lost" work years because of childcare or people who worked part-time during most of their work life.

The ministry said around 50,000 people stood to profit from the Zuschussrente when it kicks off in 2013, but it expects this number to surge to 1.5m by 2030.

Karch denied that the proposal had been the "brainchild" of the aba, but he argued that the Zuschussrente, together with occupational pension funds, could be "step forward against old-age poverty".

But he criticised a statement made by first-pillar pensions institute Deutsche Rentenversicherung, warning that people saving in the second pillar could try to reduce their payments to the first pillar to get a higher top-up in the second pillar, which would bring tax advantages.

"This statement is factually inaccurate and even scandalous," Karch said, adding that no one would intentionally plan his whole work life to fall below the €850 threshold.

He said the second pillar was no "playground" for contributions and "tax tweakers", and that people "should not be punished for something they had been told to do for several years now" - i.e. saving in an occupational pension scheme.

But Karch was more sceptical about another government proposal that would allow employers to pay additional funds into the first pillar for their employees.

"What do we tell an employee or an employer currently setting up an occupational pension scheme about having to implement yet another payment?" Karch asked delegates at the aba's annual meeting.

He said he feared this model would blur the lines between the first and the second pillars, leading to an even greater administrative burden for companies.

"I am not against making contributions to the first pillar, but it has to be checked whether something fits into the system or might rather lead to more irritations," Karch said, calling on labour minister Von der Leyen to rethink this proposal.