Following the swearing-in of the new German government, the fund industry association BVI is redoubling efforts to get MPs to introduce its proposal for a simplified retirement account.
Unveiled in late 2003, BVI’s proposal is modelled after the US based 401(k) plan and individual retirement accounts (IRAs).
Then the BVI failed to persuade the former centre-left government to adopt its proposal. The main reason was the 2002 launch of government-subsidised second- and third-pillar pensions named after ex-Labour Minister Walter Riester.
After a slow start, demand for Riester pensions has picked up dramatically this year, partly because the government simplified the third-pillar version of Riester.
Nonetheless, BVI managing director Stefan Seip argued that the Riester pensions had still not ensured that all Germans owned a corporate or a private pension.
“In the private sector, only half of German employees own a corporate pension. Only 10% of those eligible for the Riester private pension have taken it up. I don’t think those statistics reflect that Germans have the kind of retirement provision they need,” said Seip, speaking in Frankfurt.
Amid these facts, Seip said the BVI would undertake a new effort to get lawmakers to adopt its retirement account. According to him, a key advantage of the proposal is that small- and midsize enterprises - many of which do not offer corporate pensions - can set up the account at virtually no cost.