90% of German companies to launch Riester schemes

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GERMANY – Nine out of ten companies in Germany are planning to establish a new occupational retirement fund under the Riester pensions reform, according to research just published by the German occupational pensions association, ABA.

The survey finds most employers will offer their new retirement vehicle through sector-wide funds or collective group funds.

ABA says the main difference of the new schemes is that they include employee contributions. The reforms are intended to ease the burden on the traditional PAYG book reserves system that is funded uniquely by employers.

However, the survey finds that no more than 35% of employees are ready to contribute to a new style fund, attracted mainly by the fact that their contributions are exempt from tax and social security until 2008.

The survey suggests that three main types of funded retirement vehicle are emerging: Pensionskassen, direct insurance and the new pension funds.

ABA says the Pensionskassen and direct insurance funds are proving more popular than the pension funds at the moment but it expects these to catch up as the majority are still awaiting regulatory approval.

There are, however, several new Pensionskassen also awaiting the green light and this could lead to a market dominated by Pensionskassen and pension funds.

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