Germany’s pension industry is pressing ahead with reforms to strengthen occupational pensions despite growing political uncertainty following the far-right Alternative für Deutschland’s (AfD) victory in the recent Saxony-Anhalt regional election.
The governing coalition of the Christian Democratic Union and Christian Social Union (CDU/CSU) and Social Democratic Party (SPD) has agreed to extensive reforms of the public and occupational pension systems based on recommendations from a Pensions Commission (Alterssicherungskommission).
The government plans to include the changes in a legislative package for approval by the Bundestag by the end of this year.
Before then, the Federal Ministry of Labour and Social Affairs will hold discussions with social partners on concrete measures to increase uptake of occupational pensions.
This social partner dialogue, proposed by the Pension Commission and due to start on 8 October in Berlin, aims to identify measures to boost occupational pension coverage, particularly among small and medium-sized companies and in sectors with historically low levels of coverage, the ministry said.
The group of participants has been deliberately kept small to facilitate a focused and intensive exchange of views, while interested parties that are not invited to the meetings can submit written statements, the ministry added.
One of the first statements was submitted by 40 Pensionskassen, including pension funds for the financial industry, BVV, the construction industry, SOKA-BAU, and schemes operated by Bayer, Nestlé and Höchst.
The pension funds called for existing funded occupational pensions to be considered a “functional equivalent” to a reformed first pillar.
This would mean introducing a statutory provision allowing a planned 2% increase in contributions – a key element of the first-pillar reform – to instead be paid into pension funds and defined contribution (DC) schemes supported by social partners.
The pension funds welcomed the commission’s recommendations, provided they help stabilise the first pillar and strengthen capital-funded pensions, according to the statement.
The occupational pension association aba is among those invited to the labour ministry’s social partner dialogue.
In a statement, the association said it expected the dialogue to go beyond “mere general declarations” of support for strengthening occupational pensions and instead result in the development of “concrete, actionable, and practical measures”.
Aba will propose opening up DC pensions underpinned by social partners, introducing auto-enrolment with an opt-out, cutting bureaucracy and expanding support for low- and middle-income earners, the statement added.
“The election result in Saxony-Anhalt is unlikely to fundamentally prevent necessary and sensible pension reforms. However, it could contribute to politically controversial measures being implemented more slowly, watered down, or re-prioritised.”
The government should prioritise measures that facilitate participation in company pension schemes, reduce the burden on employers and improve communication of the benefits of occupational pensions to employees, according to aba.
“In our view, the government should consistently pursue the path it has already embarked upon regarding statutory and private pensions: more capital market and higher return potential rather than rigid guarantees,” WTW’s head of retirement Hanne Borst said.
The social partner dialogue is a “success if it leads to concrete, practical, and legislatively feasible measures” that significantly boost company pension schemes, particularly in undeserved sectors, Borst added.
“It is crucial, however, not to interpret the concept of the social partner dialogue too narrowly,” she said.
AfD’s victory in Saxony-Anhalt
The AfD’s historic victory in Saxony-Anhalt earlier this week, where it won 43.8% of the vote, is casting a shadow over the government’s reform agenda, however.
Pension reform was a dominant topic during the state’s election campaign this summer.
On Monday, the day after the election, labour minister Bärbel Bas said the government “must not implement social reforms against the people”.
“When people hear that they are expected to work more and for longer, take less sick leave, and face generally tougher conditions, it creates uncertainty,” Bas said, referring to the “harmful rhetoric” of chancellor Friedrich Merz.
Merz has vowed to continue on the reform path despite the controversy.
Election results influence political discourse; for instance, they can increase pressure to reach compromises, aba said.
“The election result in Saxony-Anhalt is unlikely to fundamentally prevent necessary and sensible pension reforms. However, it could contribute to politically controversial measures being implemented more slowly, watered down, or re-prioritised,” WTW’s Borst said.
