mast image

Special Report

Impact investing

Sections

German regulator giving ‘high priority’ to new DC plans

Related Categories

Defined contribution schemes, a new second pillar arrangement in Germany, have “high priority” at the country’s financial markets regulator, according to an official at BaFin.

Speaking at a Euroforum event in Cologne last week, Dietmar Keller, head of occupational pensions at BaFin, said the regulator was available for meetings with those looking to set up such plans.

It would be sensible for the collective bargaining parties to start discussions with the regulator early to avoid any problems arising at a more advanced stage of preparations, he said. 

Germany’s €26.6bn pension provider for the financial industry is getting ready to offer pension plans without guarantees to its members and Marco Herrmann, head of strategy, legal and communication at BVV, suggested it would look to take up the regulator’s offer.

He said that although there was relatively high occupational pensions coverage in the finance sector, aspects of the new defined contribution plans were still of interest to both employees and employers.

The new defined contribution plans have been made possible by a major pension reform law, the Betriebsrentenstärkungsgesetz (BRSG). Companies can only offer the plans if they have signed on to collective bargaining agreements forming the basis of the plans. Trade unions and employer representatives in a given industry or sector therefore have to opt for such plans being set up, and reach an agreement on terms.

BVV has already come up with a six-page draft of a collective bargaining agreement for its sector for the implementation of a defined contribution plan, according to Herrmann. 

The draft contract sets out several issues, such as a minimum contribution level, the type of provider that will implement the scheme, and the agreement about, if the social partners opt for it, a “Sicherungsbeitrag”, which is an employer contribution that is intended to build a cushion in case of eventual fluctuations in pension levels. 

Defined contribution plans can be operated by one of Germany’s three insurance-based pension vehicles – Pensionsfonds, Pensionskassen, and life insurers providing Direktversicherung (“direct insurance”). 

Herrmann said BVV would offer the plan through its Pensionskasse, and that it intended to offer two product types, a risk-averse plan and a more “opportunity-oriented” one.

He noted that despite the legislator’s intention to encourage less risk-averse investing – based on the argument that guarantees eat into returns –, both employer representatives and labour unions in the financial services sector were indicating they favoured the more security-oriented investment option BVV was planning to offer. 

One of the conference moderators noted it was “quite a statement” if the social partners in the financial sector were leaning towards the risk-averse option.

The conference was a whirlwind of discussions and questions about various aspects of the new plans, which, as co-moderator Henriette Meissner, CEO of Stuttgarter Vorsorge-Management, said, represented a new “paradigm” for pensions in Germany.

Karsten Tacke, deputy CEO at Gesamtmetall, the federation of employers’ associations in the metal and electrical engineering industries, said it would take time for defined contribution schemes to take hold in Germany, but “it will work.

Have your say

You must sign in to make a comment

IPE QUEST

Your first step in manager selection...

IPE Quest is a manager search facility that connects institutional investors and asset managers.

  • QN-2546

    Asset class: Real Estate Equity Fund (non listed).
    Asset region: Europe.
    Size: Total CHF 600m, approx. CHF 100-300m per fund investment.
    Closing date: 2019-06-28.

Begin Your Search Here
<