Germany has recently proposed an innovative fund, the Pensions- Sondervermögens (Pension Mutual Fund), which is set up under the mutual fund law. It would be managed by a German fund management company and be subject to the general rules for mutual funds. In addition, the fund is subject to a number of provisions designed to ensure that it is suited for old age provision.

The fund must invest in a balanced range of assets which can include money market instruments, bonds, equities, real estate and private equity investments. The fund's regulations take into account the seminal studies on the long-term outperformance of equities over bonds and have minimum requirements for investment in equity (or real estate); thus the fund's assets must be invested at least 51% in equities or real estate holdings. Total equity holdings must not exceed 75% of net assets. The foreign currency holdings must not exceed 30% of assets. This provision will lose much of its significance when the euro is introduced, though dollar and yen holdings will still be restricted to levels below their benchmark weights.

The fund must be offered in a long-term saving plan. The pay-out would be in cash, but the management company has to offer a long-term withdrawal plan, approximating to an annuity contract. There are no additional tax advantages beyond other mutual funds.

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