GERMANY – The German Union Federation (DGB) has urged the government to make it compulsory for employers to offer corporate pensions to their employees.

Speaking at a news conference in Berlin, DGB vice chairman Ursula Engelen-Kefer said the move was necessary to, in the first place, compensate for future reductions in the state pension.

As a result of government pension reforms since 2001, the state benefit is to fall to 43% from 2030 compared with around 54% now.

Engelen-Kefer also said employers should be legally obliged to offer pensions “to protect low-income employees from poverty in their retirement”.

Around 40% of German employees, particularly those at smaller companies, do not currently own a corporate pension. Although the Riester pension reforms of 2001 gave employees the right to a defined-contribution scheme, they did not force employers to provide one.

But the government has repeatedly dismissed calls – which have also come from leading pension experts like Bert Rürup and Axel Börsch-Supan – to make corporate pension saving mandatory.

Last month, deputy pensions minister Heinrich Tiemann insisted that the Riester pension reforms were working, citing the fact that 60% of employees owned a corporate pension.

“In addition, if we were to introduce the obligation, we would be creating more and not less bureaucracy and also be increasing costs on employers,” Tiemann told a pensions conference in Berlin.

German Employer Association BDA also cited Tiemann’s point about increased costs and bureaucracy in rejecting DGB’s demand.

However, the Conservative-Social Democrat government in Berlin faces a serious dilemma on corporate pensions.

This is because it is considering not extending a tax exemption for DC schemes created by the Riester reforms. This could greatly impede the further spread of the second pillar, especially among low-income employees who, according to experts, have the greatest need for it.

That tax exemption for Riester DC schemes is due to expire at the end of 2008. The government has said it will decide its fate in the spring of 2007. German corporate pensions lobby aba staunchly backs extending the exemption.

The issue will likely be hotly discussed when German pensions minister Franz Müntefering attends aba’s spring meeting in the city of Fulda on May 3-4.