Members of the BVV, the €26bn pension provider for Germany’s financial industry, have approved by a large margin proposed amendments on guarantees.
In light of the current interest-rate environment, the BVV recommended dropping its 4% guarantee for pension claims accrued from 2017.
Overall, the adjustment would entail a 24% annual cut in guaranteed pension increases, it said.
Rainer Jakubowski, CFO at the BVV, told IPE: “We have decided not to guarantee 4% net interest on all future pension rights, each year, at all times, regardless of the return situation, because it would have been irresponsible.
“We are not touching pension rights already accrued – we are merely adjusting the future to the market environment.”
He said the members of the pension provider, organised as a mutual association, understood the “need to take such measures in the current market environment”.
At a general assembly, more than 90% of employee and employer representatives approved the amendments, which will apply to both the Pensionskasse and the Versorgungskasse.
“Other providers will have to take similar steps in the near future,” Jakubowski predicted.
He conceded, however, that members had asked “a lot of questions”, and that more than 100 one-on-one talks with companies had been necessary to achieve the outcome of the vote.
On a voluntary basis, “several large members” have already pledged to make additional contributions to the BVV to compensate for the future cuts.
“There already has been significant commitment by some members, and we will see who else will follow over the coming months,” Jakubowski said.
He said it was “sad” that such measures had to be taken now, but he emphasised that it was not because the BVV had made bad investments.
Last year, the BVV granted a net interest rate of 3.4%.
“We have achieved this despite the low-interest-rate environment, which is nothing but a natural disaster created by the central banks,” he said.