GERMANY - The German province of Thüringen (Thuringia) has stopped contributions to its pension fund for civil servants.
The finance ministry of the province, Wolfgang Voß, noted in a press release that the local government had decided to suspend the €8m in contributions for 2011, as the province would have had to take up a loan to do so.
He stressed that the fund was not a funded pension scheme but a reserve pool to ease the burden of future retirement provision costs.
The minister also noted that this measure would not lead to a cut in pension payments and that it was temporary.
Voß pointed out that, in recent years, much of the surplus generated in the province has been paid into the fund set up in 1999.
In 2008, Thüringen paid €85m into the fund, and in 2009, contributions amounted to another €80m - or one fourth of the province's surplus.
Thüringen is now the second province to stop paying into its civil servants fund after Bayern (Bavaria) suspended payments for this year and 2012.
For Klaus Stürmer, managing director of the AKA - the Munich-based association of local and church pension schemes, these decisions were "problematic" as pension provision should be based upon trust and faith in a system.
"Economically it may be the right decision to take money out of these funds in emergency situations rather than take up a probably more expensive loan, but the question is whether this sends out the right signal," Stürmer said.
The opposition parties in Thüringen had even called the suggested suspension a breach of law when it was discussed in parliament last autumn.
In Bayern, opposition parties also condemned the local government for halting contributions.
Other provinces have also drawn fire for their civil servants retirement provision, and debates are likely to be heated in light of the fact that six of 16 German provinces will be holding elections this year.
In a recent study, pension expert Professor Bernd Raffelhüschen from the University of Freiburg called the establishment of a pension fund for civil servants in the province of Rheinland-Pfalz a "laudable effort", but not much more.
Further, Raffelhüschen included similar schemes set up in 11 German provinces so far, plus one for civil servants on a federal level, in his criticism, arguing that the funds were "inadequate".
Read more about Versorgungsfonds for civil servants in Germany in IPE's April issue.