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Impact Investing

IPE special report May 2018

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North Rhine-Westphalia to launch €10bn civil servant pension fund

The German state of North Rhine-Westphalia (NRW) had agreed to create a Pensionsfonds for its civil servants and has already begun building a pensions-provision buffer for more than 147,000 retirees.

Since 2006, the NRW has also been paying €500 a month into a retirement fund on behalf of each active civil servant.

It will now combine these two pots to create a €10bn fund in 2017, paying an additional €200m annually from 2018.

The NRW’s finance ministry is still working on a strategic asset allocation for the fund.

A ministry spokeswoman, however, told IPE the scheme would be able to invest in “bonds and loans issued by the NRW, other German states, provinces and municipalities, federal authorities and states within the euro-area, as well as the banks of supranational entities”.

It will also be able to invest in covered bonds, Pfandbriefe, municipal debt, equities and fund units.

The NRW has endeavoured to keep its strategic asset allocation under wraps to prevent causing any “harmful market disturbances”.

Its spokeswoman also said the NRW had yet to make any decision on external managers.

Similar pension funds in other German states have in the past selected the national bank as asset manager.

The NRW previously worked with the national bank for its active member fund.  

In the wake of the financial crisis, however, many states were forced to backtrack on commitments – made in 2006-07 for the most part – to set up funds for civil servants.

Others suspended contributions from 2010-11 or even made withdrawals.

Others, like Saxony-Anhalt, changed their minds yet again and started selecting external managers

One expert argued at the time that most of the plans were “inadequate” anyway. 

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