This is without a doubt an interesting time for pension reforms in Germany, given the inevitable associated risks of failure. 

The government has begun reforming the three pillars of the pension system. The Ministry of Labour and Social Affairs is working on a package to introduce partial funding for the first pillar, after finance minister Christian Lindner unveiled the Generationenkapital idea in January. 

Meetings are taking place to find alternatives to the third-pillar Riester-Rente product, and associations and unions have sent in ideas to change occupational pensions. The challenge is to find a political compromise, or simply the right balance, among different and at times opposing views and proposals for a comprehensive overhaul of the system. 

Reform of the first pillar has already turned into a political dispute for the finance minister. Lindner has inflamed discussions with his coalition partners by saying that the planned fund needs more capital to achieve its goals. 

True, experts say, but it is far from the pact signed at the beginning of the legislative period. The Generationenkapital idea might have found a political majority at the beginning of its journey, but there needs to be more clarity around its future. 

The main controversy in reforming the third pillar centres on a putative public fund. The stance of the consumer organisations that support the idea clashes with that of the fund industry, employers and occupational pension associations. 

Fixing the second pillar will mean reworking supervision, labour and tax laws, ESG and investment rules, and improving the social partner model. It is a complex endeavour for the government that could, if it succeeds, make up for many lost years in terms of pension reforms during Angela Merkel’s reign.

Luigi Serenelli
DACH Correspondent