The VFPK, the association of company pension funds in Germany, has rejected the Labour Ministry’s (BMAS) proposal to introduce new industry-wide pension plans.

Last month, the BMAS recommended the introduction of industry-wide, Dutch-style pension plans in Germany to increase participation in the second pillar, by allowing, among other things, employers to defer any sponsor support and other responsibilities to a yet-to-be-established protection fund.

The VFPK rejected the proposal, pointing out that employers could already set up pension plans without the obligation to make additional payments in difficult times.

Further, it expressed concerns that a new insolvency vehicle, which the Ministry proposed to hedge employer risks, would be subject to Solvency II regulations.

The VFPK said this would be “unsuitable” for occupational pension systems.

Rather than boosting Pensionskassen and Pensionsfonds, the current proposal would create “ideal conditions for profit-orientated financial service providers”, the association warned.

The pension fund association also stressed that existing Pensionskassen were organised by the social partners, as would be the newly proposed vehicles, and that existing vehicles were working as non-profit organisations without expensive sales and distribution activities.

Instead of creating new pension vehicles, the VFPK said the government should remove legal hurdles to voluntary employee contributions.

One problem currently is that some pensions received via a Pensionskasse from supplementary voluntary contributions are subject to social security taxes while those from life insurers are not.