DaimlerChrysler in Germany has launched a raft of investment funds in a bid to encourage employees to save for their retirement.
The company, last month, presented workers with the opportunity of contributing to a world-wide equity fund or a number of AS funds (Altersvorsorge-Sondervermögen), becoming one of only a small number of German companies to take such an initiative.
Jurgen Zirn, portfolio manager at DaimlerChrysler, says:“We wanted to encourage our employees to think about their own pension provision in the light of worrying government statistics on old age provision, but also give them the means to do so.
“There is no obligation for an employee to save, but we feel it is a good initiative and are offering the chance for employees to invest and save through these instruments.
The funds have been set up through the KAG’s of Dresdner Bank and Deutsche Bank and ensure a variety of available risk profiles for workers of different ages or investment preferences. And the banks themselves have carried out a series of roadshows with employees explaining how the funds work.
“Within the AS arrangement, there are four vehicles with mixed equity and fixed-income asset allocations, differing from a 40% equity ratio up to 70%,” Zirn explains.
“There is also a lifestyle concept which automatically switches between the funds depending on the working duration of an employee. The employee reaction so far has been quite good and we are now looking at the investment and take -up figures which have come back from the banks which will be published shortly once they have been released internally.”
Zirn believes the initiative is certainly acting as an example to other German companies: “ Since we began the system we have had numerous calls from corporations enquiring about what we are doing -so I think the interest is there.”
IG Bau, the industry sector union for around 1m building, agricultural and environmental workers is also in discussion over a funding initiative for employees
Frank Schmidt, secretary to the union, comments: “We are looking to develop funds for employees within the sector. Contribution money will be collected by and from the companies and put into some kind of separate investment fund, although the actual vehicle has yet to be decided.
“We are negotiating with the employers at the moment as part of this years collective bargaining process, but there are still some obstacles within the German tax system that we are trying to overcome, such as the tax deductible limit of DM936 per annum which can be applied to other individual benefits but not to pensions at present.
Schmidt believes IG Bau will have a collective agreement before the end of the year and begin collecting contributions at the start of next year.
Wolfgang Rabb, head of the pension and investment department at Germany’s BVI mutual funds trade association, says:”Company interest over AS funds for their workers is growing, particularly from societies representing smaller companies, so it going across the board.
“The fact is they are government approved and very tax efficient, and also a good vehicle for DC schemes, which so far in Germany haven’t been very popular. Hugh Wheelan