Germany could see legislation for funded company pensions by the summer, with a proposal written by the German bankers association (BBV) published last year, being pushed by the governing coalition parties.

At a hearing last month, the Ministry of Finance agreed to set up a committee to look into the proposed law, while perhaps more importantly, the parties of the CDU/CSU/FDP governing coalition have asked the Ministry to try to find room in the current legislative session for its passage.

Failing that, the coalition parties have called for the law to be included at the start of the next legislative session, although this is after the next election.

The CSU, CDU and FDP have asked the finance ministry to see whether it is possible to pass this law at a very early stage, maybe in this legislation period or if not at the very beginning of the next," says Thomas Weisgerber of the BBV, who helped draft the proposal over the course of last year.

The law proposes the allowing companies a choice of defined benefit (DB) or defined contribution (DC) arrangements for company employees with no taxation of contributions and taxation of benefits when they are paid out. (Currently contributions to vehicles such as Pensionskassen are taxed at 20%.)

The DC arrangement will offer three to five types of investment profile ranging from speculative to conservative while small companies will be able to invest in multi-company funds.

Weisgerber is hopeful that the law will be passed this session although he says that it must be introduced by May to have passed by the end of this parliament in mid-July.

He notes, optimistically, that no objections have been raised from any part of the political spectrum to the structure of the law because it provides a flexible solution to retirement benefits which may stem what has been a decline in companies, particularly small companies, offering retirement benefits.

He believes that whether the existing parties return to power or whether there is a red-green or grand coalition, that it will be on the agenda of the next government. But he cautions that the financial implications have still to be examined and that there may be worries about other financial groups seeking tax exemptions, while the insurance industry still has reason to be op-posed to the plans. He points out that the case for legislation is strengthened by the fact that the amount of tax ex-empt money will be small initially, as existing employee contracts involving taxation of contributions will stand. John Lappin"

Topics