German occupational schemes using consultants for divorcee rights
GERMANY - The majority of occupational pension schemes (bAVs) in Germany employ external consultants to help calculate pension rights for divorcing couples, Towers Watson has reported.
Data also showed an almost even split between those companies that chose to treat the former spouse as a former employee, with 51% transferring all relevant funds to a new vehicle.
Michael Karst, head of the legal and tax department at Towers Watson Deutschland, said: "In light of the economic downturn, this decision is remarkable, as it means a reduction in liquidity."
Karst added that the almost equal divide between approaches meant each company weighted the advantages and drawbacks differently.
Since late last year, German bAVs have been responsible for calculating the share of a pension each partner is entitled to upon divorce and inform the court.
To date, however, one-third of all companies questioned have failed to examine how to calculate each share, with 80% of companies that already do have policies using external consultants.
Karst said this was unsurprising given the complexity of the actuarial calculations involved.
Of the third without any plans in place, the survey found around 50% were waiting for a divorce to occur before developing their system.
Other problems cited included calculating the rate in an understandable and transparent manner, with 61% of all companies saying this was problematic, as well as correctly weighting former spouses if one was retired and one not.