GERMANY – MetallRente, the pension scheme for the German metal industry, has ended its first business year with a 7.2% return.
The fund’s joint managing director, Heribert Karch, said it was one of the highest returns in the newly created market.
He said that at the same time that its guaranteed insurance return declined to 2.75% - which could spark a debate about what will be best for the pension fund market.
“I think this controversial debate could come in the future, but it is early to say, because 2003 is the end of the very first business year of pension funds in Germany.”
He said MetallRente had achieved a “high” return in a market where the recorded returns were between 6.5% and seven plus percent.
MetallRente, is the German industry-wide pension fund founded in 2001 by the labour union IG Metall and the employers’ association Gesamtmetall for employees of the metal and electrical industries.
A total of 100,000 employees from 5,500 businesses joined MetallRente in 2003. IG Metall called it “the most successful case since the introduction of the Riester pension reform”.
According to MetallRente, the new recruits make up six percent of the work force of the 5,500 firms - which employ a total of 1.7 million people.
Karch said that MetallRente has devised three “funding vehicles”. These give a choice between “classic defined benefit vehicles and unit linked defined contribution”.
The options are: a Pensionskasse, chosen by 89% of the companies, a direct insurance and a pension fund, which in comparison with the Pensionskasse, offered “more freedom in terms of assets allocation”.
“The more solutions, the more the choice of insurance for the workers and the employees,” Karch commented.
Of the 5,500 new recruited business, about 2,800 chose to offer their employees one of the three solutions, while the remaining 2,700 opted for a combination of the three.
The average contribution, of 1,270 euros a year, was “clearly above the market average” of about 700 euros.
Martin Kannegiesser, president of the association of metal and electronic industry body Gesamtmetall, called the scheme “highly competitive model of the corporate pension which developed superbly” within the context of the Riester pension reform.
“We stick by a industry pension-scheme that is more and more crystallising itself as engine of the second pillar of pension,” Kannegiesser added.
“The success of MetallRente is a clear confirmation that a straightforward set-up, without great management expense, is the most suitable, best offer for businesses.”