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German SMEs shifting towards collective pension schemes – study

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Sector-wide pension plans, or those based on collective agreements, are slowly breaking insurers’ stronghold in pensions among Germany’s medium-sized enterprises.

In 2014, the number of companies in this segment having entered cooperation agreements with such collective schemes to provide occupational pensions increased from 21% in 2013 to 23%.

However, the trend becomes more obvious when considering that the number in 2012 was 7%, according to a survey conducted by Generali and the research institute of German news daily Frankfurter Allgemeine Zeitung.

The survey was conducted in November last year among 200 companies with 50-500 employees – after the government published the first draft of its proposal on introducing sector-wide pension plans.

The share of those with cooperation agreements with insurers has dropped from 78% in 2013-12 to 70%.

In their report on the survey, the authors state that only one of the 200 companies in the sample ran its pension plans on its own – “all others are using external services”.

Another major trend identified in the survey is the rise of jointly financed pension plans, where both employers and employees pay contributions.

In 2013, this model became the most commonly used among medium-sized companies, overtaking pure employee-financed deferred-compensation models, or Entgeltumwandlung, for the first time.

At present, 67% of companies in this segment – up from 59% – are offering jointly financed pension plans.

Occupational retirement provisions into which only the employer pays contributions have lost further ground and can only be found among 18% of German companies, down from 24% and 32% over the two years previous.

The authors argue that the “heightened interest” in occupational pensions among employees of medium-sized companies is “obviously a consequence of employers taking more money into their hands” for such projects.

One of the “weak spots” in occupational pensions in this segment of the German economy is “communication”, the researchers found.

The survey found that relatively few employers comprehensively inform their employees about their pension plans and possible options.

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