The pension reform process started by the German traffic-light coalition – Social Democratic Party (SPD), the Greens, and the liberal party (FDP) – to underweight guarantees and overweight risks and returns, might be in danger after the general election take place on 23 February.

The FDP and the SPD could finish the job they started, but the liberal party might not even reach the 5% threshold of votes to seat in Parliament, and an alliance with the SPD after the election seems unlikely after chancellor Olaf Scholz (SPD) fired finance minister Christian Lindner (FDP).

The liberal party has laid out a 10-point plan to “update” the German pension systems relaunching the equity pension (Aktienrente) in the first pillar, with contributions flowing into a fund using a similar concept as in Sweden, and the retirement savings account Altersvorsorgdepot (dubbed Lindner-Depot) in the third pillar, and higher equity investments for company pension schemes.

The president of the German Federal Agency for Breakthrough Innovation (SPRIN-D) has joined the public debate calling to deploy capital-funded pensions to support research and development projects, and start-ups growth in Germany.

Quick Thoughts - The Opportunities in Innovation

SPRIN-D had €220m available last year, far from enough to turn technological innovation into profitable companies

The Citizens’ Fund (Bürgerfonds) pitched by the Greens, instead, is a sort of equity pension but financed through public funds, a plan that will likely meet resistance by the FDP.

The SPD wants to strengthen occupational pensions targeting higher returns without guarantees, according to the party’s electoral programme approved by members last week.

The reform plans of the Union, the alliance of Christian Social Union (CSU) and Christian Democratic Union (CDU), lack details and are hardly a new dawn for the German pension system.

Left and right populist parties – Bündnis Sahra Wagenknecht (BSW), the spin-off of The Left (Die Linke), and Alternative for Germany (AfD) – look to Austria as a model to beef up pension payouts.

Switzerland and Austria

In Switzerland, Innovation Zweite Säule (IZV), the association of Swiss second-pillar experts, and consultancy c-alm have proposed a ‘light touch’ reform of the second pillar pension system, while think tank Faire Vorsorge has put forward radical changes

Meanwhile, Swiss pension funds have seen a boost in returns and funding ratios last year.

Agenda Austria, a think tank, has called on the next, likely far-right led government, to reform the pension system and increase retirement age in order to financially stabilise the country’s pension system in the long term, in view of demographic changes.

Items to note:

Luigi Serenelli

IPE DACH Correspondent

This news briefing was published earlier in the week. If you would like to receive it regularly, on your ‘IPE profile’, go to ‘My Newsletters‘ and select any from the list.