DC schemes prevail among German execs
GERMANY - Occupational pension plans are a fixed part of the remuneration for executives at German large companies, but evidence from consulting firm Mercer suggests most executives are now members of defined contribution (DC) schemes.
Mercer has updated its Executive Pension Survey, last carried out in 2004, which looked at 16 Dax-listed companies and seven other selected large companies, and then analysed the benefits offered to people whose positions were two manager levels below the company board members.
The consultancy found that the trend towards providing executives with access to more DC and fewer defined benefit-style (DB) schemes had continued, as most of these companies today organise their executive pension plans as a DC scheme.
Mercer also found that the benefit level provided in the DC schemes was "considerably lower" than in older DB plans. Stefan Oecking, head of international retirement consulting at Mercer Germany, noted this was likely to be because DC plans were set up after the value of general benefit levels offered to employees had already been decreased.
Executives at half of the companies surveyed were allowed to contribute to the pension plans, while at a quarter of the companies studied the contribution is matched by the employer in addition to the employer's regular contribution.
"The share of the benefit level which stems from executives' own contribution is considerable in some cases", noted Oecking.
"But there is no general trend concerning employee contributions. It entirely depends on the company's philosophy," he added.
Another change to executive pension plans over the last few years, as acknowledged by Mercer, was the inclusion of variable payments, such as bonuses, into the retirement provision.
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