Germany’s corporate pension funds have given the thumbs-up to government plans to strengthen occupational pensions in the country.

The VFPK, the association representing company pension funds, welcomed the government’s proposal.

“This opens the way for occupational pension products that are suitable for a low-interest-rate environment,” it said.

It added that the government’s plan to do away with guarantees would ensure that pension promises – excepting those from providers considered IORPs under EU rules – would remain “outside the Solvency II regime” for insurers.

The association also “noted positively” the proposal to stop counting savings in occupational pension plans towards the so-called Grundsicherung, a basic income for people who do not earn enough to support themselves. 

“For lower earners in particular, this removes a major obstacle to participating in occupational pension plans,” the VFPK said.

The comments were made days after the government presented its plan for a new type of industry-wide pension plan, which can be set up by the social partners either in new vehicles or within existing ones.

Among the key innovations is the Zielrente, a defined ambition or target pension approach without guarantees or long-term liabilities for employers.

This model is new to Germany, where sponsor companies have been required to back any pension promise, topping up funding whenever necessary.

MetallRente – one of the few already existing industry-wide second-pillar schemes based on collective-bargaining agreements – said social partners in Germany needed “a strong vehicle” to increase the number of companies with supplementary pension plans.

Managing director Heribert Karch, who is also chairman of the pension fund association aba, welcomed the reform proposals for lower incomes.

These include state subsidies and the simplification of social and tax contributions on incomes from various pension sources, such as the German state-subsidised Riester-Rente or a Pensionskasse.

He was critical, however, of the fact that companies, due to tax reasons, would still have to choose different pension vehicles for different levels of income to avoid having to make double contributions for lower earners.

“This,” he said, “would be socially unfair.”

He also renewed his criticism of the shortfall caused by increasing the tax-exempt contribution level to just 7%.