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The current German pension reform draft will not help to increase SME participation in occupational pensions, according to delegates at an industry conference.

This was the overwhelming consensus from a live ballot of around 300 delegates – including pension providers, employer representatives, and pension funds – at this year’s occupational pensions conference organised by German financial newspaper Handelsblatt.

Over 70% of the providers and more than 40% of the employers and pension funds agreed that restricting the new defined contribution (DC) model to collective bargaining agreements between employers and employees would mean the pension arrangements would not reach small and medium-sized businesses.

Under the current reform draft, known as the “Betriebsrentenstärkungsgesetz” (BRSG), only companies that have signed a collective bargaining agreement would be allowed to introduce new pension plans without any guarantees regarding retirement benefits. The draft still has to be approved by parliament.

However, many smaller companies have not joined such agreements because they fear some of the minimum standards would decrease their competitiveness.

In another poll of the delegates, 46% of providers and 42% of employers and pension funds said they would like to open up the new pension model to all companies.

However, Yasmin Fahimi, undersecretary at the German ministry of labour BMAS, told delegates the government would not change its position.

“The new pure defined contribution model in which employers can rid themselves of all liabilities cannot be allowed to be negotiated within individual companies because worker representatives might be put under pressure by the employer,” Fahimi said.

Only a collective bargaining agreement could “ensure trust” for the new model, she added.

Fahimi also took a strong stand on the scrapping of guarantees in the new plans: “This is the right way because in the current low-interest rate environment there is no other answer – any guarantee would decrease the chance to use market opportunities.”

Meanwhile, employer representatives from the chemical and metal industry already signalled they were working on a way around this limitation in the new law.

Rainer Dulger, president of the employer association for the metal industry, said: “We would allow companies to only partially join our collective bargaining agreement to be able to make use of the new pension model. Why should they buy a cow if they only want a glass of milk?”

He added that offering pension plans would become more important for companies if they wanted to stay competitive, but especially as SMEs often could not afford to set aside buffers for liabilities.

Klaus-Peter Stiller, managing director of the federal employer association in the chemical industry, agreed in part: “For some parts of the collective bargaining agreements I would require companies to ‘buy the whole cow’ as it were. But in the case of the new pension model I would rather see companies agree to this part rather than not to pay into a pension plan at all.”

However, Peter Hausmann, board member at the union for the mining, chemical, and electrical industries, said he was “vehemently opposed” to cherry-picking pension plan features.

The new framework will also allow auto-enrolment. Employer representatives at the conference seemed more opposed than unions, as they fear all companies would have to offer a pension plan.

Both workers’ and employer representatives agreed that the legal framework should leave them sufficient leeway for negotiating the new pension plans. 

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