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Pension experts in Germany have welcomed the proposed introduction of occupational pension plan subsidies for people with lower income and SMEs.

The government is considering the introduction of subsidies for small and medium-sized enterprises for setting up new pension plans.

Under the proposal, the government could reimburse as much as 30% of SMEs’ expenses and contributions for setting up an employer-financed pension plan.

Additionally, pension plans for people with lower incomes could be subsidised.

These are two details that have surfaced on government plans to introduce industry-wide pension plans – a full draft is expected to be presented around the end of October.

The debate over pensions had been postponed last year to prioritise the implementation of the EU’s Portability Directive and await the results of government-commissioned studies into the German pension system

Thomas Jasper, retirement head for Western Europe at Willis Towers Watson, told IPE the subsidies were “the right proposal and an important one to create an incentive for both these groups”.

Another disputed feature of the awaited government proposal could be an “opting out”.

Jasper confirmed that this idea was on the table, adding that “it makes sense”.

But he also pointed to legal uncertainties regarding opting-out models that would have to be clarified.

One possible conflict might be that, under German law, workers must be free to decide how to use their income – current regulations on deferred compensations are also based on voluntary transfers.

Various experts at an event organised by German think tank the Pensions Akademie also welcomed the subsidy proposal.

Its panel also proposed the introduction of ‘defined ambition’ plans in Germany, where a target pension payout is set without guarantees.

To date, the German second pillar has seen almost no models without guarantees.

However, in the initial concepts for industry-wide pension plans, the idea to introduce a ‘pay-and-forget’ model for German companies was high on the agenda to increase the number of occupational pension plans.

At the event, Marco Arteaga, a partner at law firm DLA Piper and one of the co-authors of the government-commissioned studies on the second pillar, argued that the end of guarantees did not mean savers were worse off.

He cited calculations by academic Oskar Goecke from the technical university in Cologne showing that waiving guarantees did not entail less security.

He said risk-sharing among the collective of insured people “significantly increased” the chances of higher returns.

At the Pensions Akademie event, Heribert Karch, chairman of the German occupational pension association aba, also backed the idea of defined ambition plans. 

“Defined ambition models are widening the spectrum of occupational pensions and create a new framework for dividing risks,” he said.

Union representatives said worker representatives would reject any model that lacked guarantees completely.

However, industry insiders have noted that, in principle, the unions are in favour of lowering guarantees and that, with statements like the one above, they are “preparing for the upcoming negotiations”. 

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