Germany's second-pillar pension funds deserve their own watchdog – VFPK
GERMANY - German second-pillar pension funds should get their own supervisory body, Peter Hadasch, board member at the association of German company pension schemes (VFPK), has told IPE.
In the debate on Solvency II, the VFPK also demanded a clearer separation of regulations relating to occupational pension providers and those relating to insurers.
In an interview, Hadasch, who is also head of the Nestlé Pensionskasse in Germany, went a step further and said he would like to see the supervision of pension funds being separated from that of insurers.
He said the rising level of European legislation to be integrated into the German regulatory framework would make it even more difficult for pension funds to identify the relevant passages.
"This Europeanisation in pension regulation leads to an increase in insurance technicalities, which is in contrast to the German social tradition of occupational pensions," Hadasch said.
Like many industry representatives, he sees the danger of supervisors using insurance standards on insurance-based vehicles like Pensionskassen.
He added that stakeholders such as unions and other employee representatives should be heard more by the supervisor Bafin in discussions on guarantees, risks and safety in the second pillar.
According to Hadasch, pension funds are "more and more turned into competition for financial service providers", with the social aspect - which includes a "certain bond" between the company and the employee - being lost.
In Germany, he sees a "lack of clear separation" between the three pillars of the pension system.
He argued that a strict definition of the first pillar as securing the bare minimum, the second pillar as enabling a certain standard of living and the third pillar as generating additional wealth would facilitate the separation of supervisory bodies.
Hadasch was sceptical of German work minister Ursula von der Leyen's proposal to provide a first-pillar top-up for citizens bordering on old-age poverty.
"Why would people continue to save in the second pillar if they knew they would get additional money on retirement anyway," he said.
Instead, participation in occupational retirement schemes should be rewarded.
Hadasch said the main problem was the misperception of the second pillar among politicians.
"They just do not see there are a lot of people with very low incomes saving in occupational pension schemes," he said.
"To the politicians, the second pillar is just high income earners amassing money."