The current legislative period could bring substantial changes to Germany’s pension system. The government is pursuing reforms to fund first-pillar pensions through a buffer fund invested in equities, although there is little consensus on its feasibility.

Finance minister Christian Lindner said the ‘Aktienrente’ (Equity Pension), which is the building block to turn the first pillar into a partially funded system, will start this year with an initial €10bn. A small amount, but conceptually a big step, Lindner said. 

Initially, the Equity Pension will be state-funded but further funding is an issue. Lindner has admitted publicly that the fund will need billions more to deliver a stable level of contributions and pensions. 

Doubts about funding levels have existed for some time, as well as whether the governing coalition will be able to meet these needs. Another aspect is governance. The government wants to set up an independent public body to manage the fund. 

In this case, the model would be KENFO, the state fund financing nuclear waste disposal, which has among its governing bodies a board of trustees made up of representatives of political parties and ministries. It monitors the management board and is advised by an investment committee. 

How will the government guarantee the independence of the fund from political interference? Politically, the coalition’s Social Democrat and Green members are unconvinced that the Equity Pension, as conceived, will make any difference to first-pillar pensions. 

Setting up a fund akin to AP7 in Sweden was an idea of the liberal-minded FDP, which is determined to fulfil its campaign promise. The question is whether the coalition partners will continue to support Lindner’s plan.

Luigi Serenelli, IPE DACH Correspondent