German association fears for corporate pensions

Boy-Jürgen Andresen, chairman of German occupational pensions association Aba, has warned that the further development of corporate pensions in Germany is in peril unless the government prolongs a social tax exemption for defined contribution schemes.
The social tax exemption for the DC schemes, created by the Riester reforms of 2001, will expire at the end of 2008. Experts say the government is considering not prolonging the exemption partly because it needs more revenue for Germany’s state-run health care system.
The government also believes that the further development of corporate pensions does not depend solely on the exemption.
But Andresen disputed this. He noted that while the spread of corporate pensions in Germany – 60% of employees – was higher than the EU average, the pension still “had plenty of room to develop”.
“So why is it considered politically sensible to recklessly endanger the further development of corporate pensions? The answer is €300m in annual revenue that the exemption represents,” Andresen told participants at Aba’s spring meeting.
The trouble, according to Andresen, is that even if the revenue benefited the health care system, Germany’s structural problems would not be solved. “At the same time, however, the damage to corporate pensions would be considerable,” he said.
“The best case would be that more people would save more privately for retirement. However, as the government’s social experts have pointed out, many will not do this…but instead increase consumption,” Andresen added.
The government is to decide the fate of the exemption in the spring of 2007.

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