Germany's aba urges strengthening of second pillar, auto-enrolment
GERMANY - Government and trade unions must work together to increase participation in Germany's occupational pension system (bAV) without falling back on legislation to introduce compulsion, according to the aba, the country's working group on occupational pensions.
The organisation also suggested that rather than compulsion - an approach implemented in Australia - a system of auto-enrolment could be employed as a means of increasing participation.
Speaking at an event in Berlin, chairman Heribert Karch renewed his call for the introduction of a bAV panel attended by members of government, social partners and industry experts, as well as arguing against the "counterproductive" introduction of Solvency II and minimum standards for schemes as mandated by the European Commission.
Karch, head of multi-employer scheme MetallRente, said that the ability of the country's second pillar had been underestimated in the past, calling it "startlingly easy" for employers to use and praising its low cost and efficiency as yielding the best retirement outcome for members.
He said the cooperation between employer and employee representatives, as well as mutual acceptance of the issues, had led to a productive outcome for all.
"However, a sustainable and future-proof solution of the demographic challenges has yet to be achieved. Further engagement is therefore of utmost importance to allow for a sustainable retirement system in Germany," he said, stressing that an increased uptake of the bAV system was therefore "especially important".
Karch said courage was more important than money in encouraging growing participation, arguing that monetary incentives to pay into the second pillar were not as important as selling the bAV as a social benefit for members, while also being part of their personal responsibility in preparing for old age.
Laying out its position, aba stressed that government and social partners should work together in achieving higher participation and not wait for action from the other - explaining that if uptake continued at the current pace, coverage would not be sufficient in 20 years' time to guarantee sustainable benefit payments.
While admitting that Germany lacked the historical approach of personal responsibility in retirement - due to adequate levels of state pension payments - it warned that the introduction of compulsion would bring with it "numerous problems".
"Increasing participation can, on the other hand, be achieved through a number of measures enhancing the collective approach taken as well as overcoming inertia, allowing employers and employees to begin saving through automatic processes," the aba's detailed paper, entitled 'Dialogue in favour of occupational pensions' said.
The aba further renewed its call for an occupational pensions panel attended by social partners, industry experts and members of three of the responsible government ministries - with Karch saying it would not only look at ways to expand coverage, but also consult with government on relevant matters.
The chairman further called for easing of the administrative burden caused by shifting direct benefits and assets held in Unterstützungskassen to Pensionsfonds.
Addressing the risk of further regulation from Europe, he said: "Unnecessary and damaging European regulation, such as the capital requirements of Solvency II, must be stopped, just as the introduction of European minimum standards for bAVs have to be opposed."