European asset managers are realigning their strategies to capture opportunities from a once-in-a-generation overhaul of Germany’s three-pillar pension system.
“We are living through one of the most significant reform phases in German pension policy in decades,” Amundi Deutschland chief executive officer Christian Pellis told IPE.
The government is working on legislation to create mandatory individual accounts for investing part of first-pillar pension savings in a default fund or a limited number of investment funds, following the Swedish premium pension model. It would represent the first comprehensive reform of the system since 1957.
Amundi is “well positioned to take an active role” in a reformed first pillar, Pellis said.
“That applies both to the management of a potential default vehicle and to participation in the open fund selection platform,” he added.
During an analyst conference call in July, DWS CEO Stephan Hoops described the reform of the German pension system as “one of the most significant structural growth opportunities in the coming years”.
DWS is positioning itself to manage potentially €34bn of annual inflows into capital markets resulting from a planned 2 percentage-point increase in state pension contributions.
“That could mean asset management mandates or offering certified private alternatives to those who opt out,” Hoops added.
Allianz Global Investors (AllianzGI) said in a statement that the scale of opportunities created by a Swedish-style pension system would depend on the extent to which the future framework allows certified private investment funds or specialist managers to participate alongside a public default fund.
Occupational pensions
The Federal Ministry of Labour and Social Affairs is to discuss measures to boost defined contribution (DC) plans backed by social partners, particularly among small and medium-sized firms, following recommendations from the pension commission (Alterssicherungskommission) in June.
DWS estimates that asset managers currently oversee more than €770bn in company pension assets, with further growth expected from the reforms.
The asset manager plans to build on existing relationships and expand tailored advice and individualised investment solutions for multinationals and large corporates, Hoops said during the conference call.
“For German mid-sized companies, the opportunity is different. We are building a scalable defined contribution solution, combining Deutsche Bank’s distribution with our lifecycle-based investment expertise,” Hoops added.
Employers are looking to reduce balance-sheet and funding risks while continuing to offer employees attractive long-term return potential.
“This creates demand for modern, capital-market-oriented occupational pension solutions, including lifecycle concepts, fund-based investment strategies, digital administration and flexible payout options,” AllianzGI said.
Amundi supports wider uptake of DC plans through auto-enrolment, underpinned by cost reductions and uniform standards.
“The goal must be a comprehensive coverage of all employees through occupational pension provision,” Pellis noted.
Private pensions
The private pension reform will create the retirement savings account (Altersvorsorgedepot), allowing investment in equities, funds and exchange-traded funds (ETFs) and replacing the Riester-Rente contracts introduced in 2001.
DWS will launch its own retirement savings solution, with Deutsche Bank as its key distribution partner, targeting private clients, self-employed people and SMEs.
The asset manager is showcasing its new products at roadshows in 12 German cities to train and prepare distribution partners for the opportunities created by the private pension reform, DWS head of pension Björn Deyer told IPE.
Products include active funds, passive ETFs, an active ETF offering and a premium option based on a multi-asset approach.
AllianzGI is working with distribution partners to develop tailored Altersvorsorgedepot solutions for customers.
Overall, AllianzGI said the reforms could support demand for asset managers that combine capital-market expertise for long-term investment with solutions tailored to pension savers, employers and distribution partners.
The shift towards a capital-market-oriented pension system over the long term “has the potential to change the industry structurally – larger assets under management, longer investment horizons, and higher demands on quality and transparency,” Amundi’s Pellis said.
