German pension fund association calls for 'breathing room' on funding
GERMANY – Regulation concerning funding levels is “choking” Germany’s pension funds, according to Heribert Karch, chairman at the aba.
Speaking with IPE at this year’s annual aba conference in Berlin, Karch also argued that the second pillar’s “very conservative” asset allocation no longer fit the ‘new normal’.
In Germany, all pension vehicles, except Pensionsfonds, have to ensure assets fully cover liabilities on a daily basis.
But Karch said this stipulation was choking schemes and argued that Germany must “lose the fear of temporary underfunding”.
“Occupational pension plans should be allowed to learn to breathe freely to a certain degree instead of being forced to hold their breath until they cannot hold it any longer,” he said.
Karch called for talks with German supervisory body Bafin on the matter, although he conceded the aba had not yet prepared a detailed proposal.
On the question of how to increase participation in the second pillar, Karch called on all industries to include occupational pensions in collective agreements, similar to the way the chemical, financial and insurance sectors have done.
He also said SMEs were not the only ones to have been slow in implementing occupational pension structures, pointing out that many larger companies were reporting coverage ratios as low as 20%, compared with 80% in the chemical industry.
In recent years, opting-out approaches and quasi-mandatory schemes for the second pillar have been mulled at several aba conferences.
At this year’s annual conference, Peter Hausmann, head of the union for chemical workers and miners, agreed with Karch, saying “a bit more pressure” had to be exerted.
“We have to come away from pure voluntary involvement, and we have to look into the possibility of ‘opting-out’ very intensively,” he told delegates.
Wolfgang Goos, from the employer federation for chemical companies, put it even more directly when saying Germany “may have to think about a mandatory scheme” – albeit one coming with a transition period and the ability to opt-out.
In her speech, Ursula von der Leyen, minister for work and social affairs, did not directly mention the issue of a mandatory second pillar, but she promised the state would “support the expansion of occupational pensions wherever possible”.