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Analysis: A German battle for consensus over DC plans

This year’s occupational pension conference hosted by the German daily newspaper Handelsblatt became an impromptu tribute, of sorts, to the influential pensions pioneer Bernhard Wiesner.

The shock of his sudden death just a few days earlier could still be felt among about 300 delegates who gathered in Berlin in March.

Heribert Karch, head of German pension association aba – of which Wiesner had been a long-term board member and very active representative – was asked to give a short eulogy. EIOPA president Gabriel Bernardino and PensionsEurope chairman Janwillem Bouma also paid their respects to one of the most outspoken and committed pension experts on both a national and European level.

The consensus among delegates was that the conference, its agenda, and also many of the discussions during the breaks were tributes to Wiesner. Even stakeholders who maybe had not always agreed with him on the new ideas he sought to introduce to the German pension system acknowledged his relentless fight for modernisation.

The main topic of the conference, the Betriebsrentenstärkungsgesetz (BRSG) the law for strengthening occupational pensions, is commonly viewed as the offspring of the pension model Wiesner introduced at Bosch, and which is quite close to a defined contribution plan. 

All pension stakeholders, even most of the union representatives, were in favour of the BRSG, which could finally bring pure DC to Germany – and even legally forbid guarantees in certain industry-wide pension plans. However, political compromises have diluted some of the demands originally made by the pension industry. 

In addition, several details of the draft law – it is still being discussed by the German parliament – were worrying to some stakeholders. For one, many industry representatives think the limitation of the new pure DC plans to vehicles set up by union and employer representatives together will not reach smaller companies that do not have retirement provision. Often such companies are not part of bargaining agreements. 

The pension industry would like to see the new DC plans made available to all. But Yasmin Fahimi, undersecretary at the labour ministry BMAS, reiterated at the conference that the ministry believed the collective bargaining agreements offer the best protection against companies walking away from the responsibility of top-up payments and guarantees.

This is also why the still widely used Direktzusage model – book reserves for pension promises – cannot be set up without guarantees. Fahimi told delegates that negotiating pure DC plans with one single employer would put too much pressure on employee representatives in that company. 

Despite this, the consensus among the larger companies was that they would continue to offer Direktzusage pensions. Some said they might think about a combination of pension plans. 

Wolfgang Degel, head of BMW’s centre of competence for retirement provision, emphasised: “With industry-wide pension plans, companies can no longer set themselves apart with special arrangements.”  

Apart from the BRSG, there were only two other topics being discussed. The first was the review of the IORP Directive. At times, it felt more like an exchange purely between EIOPA and PensionsEurope over stress tests and the controversial holistic balance sheet concept – neither issue was picked up by the German pension plans in attendance.

However, PensionsEurope made good use of the stage to reiterate its demand for EIOPA not to introduce any further changes until the scheduled IORP review – a period of “legislative calm”. 

The final conference day was dedicated to digitalisation. Apart from Telekom, which has had a dedicated pension portal for quite some time, Hoechst pension fund has to be mentioned as one of the pioneers. It has introduced an app for employees and managed to digitalise all paper files relating to the fund.

Meanwhile at BMW the IT department has created a calculator that allows employees to enter their pension claims and get an estimate on any future pension gaps.

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