Sections

German government dismisses pension industry's call for reforms

Related images

  • German government dismisses pension industry's call for reforms

GERMANY – Germany's centre-right coalition government has dismissed the pension industry's calls for reform of the second-pillar system.

Currently, a company setting up an occupational pension scheme in Germany has five legal structures available to it.

Occasionally, a company will need to employ all five structures to cover the whole of its workforce, as each structure comes with certain restrictions.

One such restriction is a cap on the share of a salary that can be transferred tax-free to a Pensionsfonds, the youngest vehicle in the second pillar.

This means Pensionsfonds seldom cover board members or other senior employees.

For some time now, the pensions industry has been calling for the abolition of this cap to reduce complexity in the second pillar and allow for some schemes to be merged.

But Peter Görgen, head of the supplementary pension department in the German labour ministry, has dismissed this demand.

Speaking at the aba's annual conference in Mannheim, he noted that not even the existing limit had been made use of fully, and argued that there was therefore no need to abolish the cap.

But Michael Hessling, head of the working group for insurance-based Direktversicherungen schemes, said the existing structures had prevented occupational pensions from "developing further".

He said the "complexity" in the second pillar had deterred some employers, and made the system less trustworthy for employees.

Görgen presented the latest figures on the coverage of occupational pensions showing that around 60% of the German workforce now had benefits accrued in the second pillar, with the increase having slowed down since 2005.

Hessling called on the government to create "incentives" for the social partners, including opting-out systems for occupational pension schemes in the collective bargaining agreements.

The pensions industry has also been highly critical of the government's plan to allow employers to make additional payments for their employees into the first pillar to cover invalidity pensions.

Hessling said: "This is very problematic, as it might be a first step towards abandoning the three-pillar structure agreed on for the German pension system."

He said this was simply a means of introducing a "de facto sixth way" of setting up occupational pension savings, making the system even more complex.

But Görgen pointed out that additional contributions to the first pillar would be a "very good way" to get a broad coverage for invalidity pension benefits.

Have your say

You must sign in to make a comment