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Employer group calls for changes to Germany's pension protection fund

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  • Employer group calls for changes to Germany's pension protection fund

GERMANY - Germany's employer association (BDA) has called for a new risk-based levy for the pension protection fund (PSV) that rejects the UK practice of basing calculations on insolvency risk.

It instead recommends the inclusion of Pensionskassen and contractual trust agreements (CTAs).

The insolvency of retail giant Arcandor in 2009 - which increased the contribution each company must pay to an all-time high - has fuelled the debate over possible changes to the PSV levy.

The BDA has worked on a proposal for a risk-based levy, which it commissioned consultancy Heubeck to assess and improve.

As in the BDA's original recommendation, Heubeck confirmed that a company's insolvency risk would not be part of the calculations.

Presenting the study at a conference organised by pension fund association Arbeitsgemeinschaft betriebliche Altersversorgung (AbA) in Cologne last week, Alexander Gunkel, board member at the BDA, said: "According to our information, the implementation of a risk-based levy including insolvency risks is not working so well in the UK."

Richard Herrmann, board member at Heubeck, confirmed there was no need for company ratings on their insolvency risk, and that dropping this component from the levy would maintain the "solidarity principle" at the PSV in place.

The levy proposal is based on creating various risk categories, according to the type of pension scheme a company offers.

The BDA and Heubeck also called for more regulation for CTAs, and for them to be included in the PSV scheme.

In its assessment, the consultancy created a case for a so-called "qualified CTA", which should include the assets in the CTA being set aside exclusively for pensions and the legal framework being checked by a third party.

Based on such a construction, a company's levy would be as much as 35.4% less than the rate it currently pays, while a company with a similar pension liability on the books, but without a qualified CTA in place, would see its levy rise by 13.5%. 

Herrmann noted that Heubeck had recommended including Pensionskassen and other insurance-based schemes in the PSV.

He explained that companies facing higher capital requirements under new solvency regulations for insurers might prefer to be able to discount their Pensionskasse - which, in Germany, is insurance-based - for the PSV-levy calculations than pay more into the Pensionskasse itself.

In contrast to Heubeck, the BDA stressed that it was not recommending the inclusion of Pensionskassen into the PSV.

It welcomed comments on the proposals from all interested parties in the coming months in order to achieve as broad a consensus as possible on the matter.
 

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