Employees in larger German small and medium-sized enterprises (SMEs) are becoming heavily reliant on occupational pensions schemes compared to smaller firms, according to a report published by Generali Germany.

According to the research, which is based on interviews of HR managers responsible for occupational pensions conducted in January, 50% of the employees in SMEs with 250-500 staff (larger SMEs) chose an occupational pension scheme, compared to 46.8% in firms with 100-250 employees (medium-sized SMEs) and 39.9% in those with 50-100 employees (smaller SMEs).

The study revealed that 64.2% of top management employees in larger SMEs sign up for an occupational pension scheme, as opposed to 61.1% in medium-sized SMEs, and 48.8% in smaller firms.

Overall, the market penetration of occupational pensions among top management rose by more than 4% to 58.6% in 2020.

Below top management level, the proportion of employees opting for an occupational pension is 55.8% in larger SMEs, 52.6% in medium-sized SMEs, and 38% in smaller companies.

For employees, the relevant aspects of an occupational pension include the security of the system through guarantees (42%), flexible contributions and payments (38%) and for 35% an important point is the return on investments.

Some medium-sized SMEs remain sceptical towards the Betriebsrentenstärkungsgesetz, or BRSG, the law that introduced defined contribution pension plans without guarantees, while larger SMEs show optimism about the rule and its effects (51%).

The majority of large companies expect a higher level of interest from the employees for occupational pensions schemes as a consequence of the BRSG law, compared to 41% among small and 43% of medium-sized companies.

Occupational pensions based on mixed forms of contribution from the employer and employees grew by 4% to 76% in 2019 – pure employee-funded compensation remained stable at 44% and for the first time in three years, the pure employer-financed company pension schemes showed a 3% increase to 29%.

Mixed forms of contribution dominate in larger SMEs with 85%, while pure employers financed schemes are used mostly in smaller firms.

Among medium-sized companies, 84% offer direct insurance (Direktversicherung) in a portfolio of occupational pension schemes, and 57% a Pensionskasse as a way to set up old age provisions.

Larger SMEs in particular provide employees with an occupational pension through a Pensionskasse, the report added.

Behind the two main ways to operate occupational pension schemes rank the support fund (Unterstützungskasse) and Direktzusage, or direct commitment, at 32%, which remains stable compared to last year’s figures.

Direktzusagen are used particular as a form of occupation pensions in larger companies (41%), with 28% in smaller companies.

The insurance industry underpins its leadership among the providers of occupational pensions with 83% of SMEs that cooperate with insurances – a 2% increase compared to the prior year.

Pensionskassen, on the other hand, lost market share as cooperation partners with 41%, a 3% decrease compared to kast year and the worst performance since 2011.

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