The PSVaG – the insolvency protection vehicle for Pensionsfonds and other occupational pension funds in Germany – has changed its levy structure to ease the burden on companies in economically challenging times.
One of the changes to the lifeboat scheme concerns the “splitting up” of levies when the number of insolvencies increases.
The proposed amendments to the PSVaG come as part of the new government’s proposal on the law for modernising the financial supervision of insurers in the wake of Solvency II.
Speaking at the German pension association’s annual conference, Hans Melchiors, a board member at the €4.6bn PSVaG, said: “After the implementation of this new legal draft, we can divide a particularly high levy up into four annual instalments, even if it is not higher than that of the previous year.”
Up until now, only the difference between the levy in the previous year and that calculated for the current year could be split up into four rates.
This limitation is problematic when there are several consecutive years of crisis, as, from the second year of crisis, the legal provision cannot be applied.
“We have introduced greater flexibility,” Melchiors said.
Further, the target size for the additional compensation fund – or Ausgleichsfonds – paid by the PSVaG has now been fixed at 60 basis points of the ‘contribution assessment basis’ (insured assets from which the levy is calculated).
To date, it has been set to the average claims volume over the previous five years.
“This means the target size is subject to a lower volatility than before,” Melchiors said.
Additionally, payments to the compensation fund will be made ‘anti-cyclically’, which means more will be transferred over in years where the levy is low; if the levy is more than 35bps, no payments to the compensation fund will be made.
“Withdrawals, which require the consent of the supervisory authority, will be possible once the claims volume from insolvencies in a year is higher than 50 basis points of the contribution assessment basis of the pension schemes from which the levy is calculated,” said Melchiors.
In the wake of the implementation of Solvency II, the German government has now clarified that the PSVaG is to be treated as a smaller-size insurance company, to which the new regulations do not apply.
The government’s legal draft accounts for the specialities of the PSVaG by adding specific requirements.
For example, the fund will still have to install an “internal revision as specified under Solvency II”, Melchiors said.