GERMANY - Professor Bert Rürup, the government’s chief economic advisor, has come out in support of a semi-mandatory corporate pension, saying the Riester reforms of 2002 have not done enough to boost the second-pillar.
The reforms gave employees the legal right to a defined contribution scheme. However, unless the employer already offers a corporate pension plan, the burden has been on the employee to set it up.
Rürup, also one of Germany’s best-known pensions experts, observed that more than three years on, demand for the second-pillar version of Riester in the private sector has remained below government targets.
“The latest statistic is that 16m employees have access to the scheme. The trouble is that no one knows how many have actually participated,” Rürup told IPE at his office at the University of Darmstadt. “My feeling is that the lack of participation is a particular problem among lower-salaried employees.”
The Riester reforms, which also affect the third-pillar, were intended to compensate for the shrinking state pension. That benefit is expected to sink to 43% of a monthly salary from 2030 from 52% now, as a result of Riester and a further pension reform last year.
Rürup said he backed an idea touted recently by pensions academic Axel Börsch-Supan whereby employees would automatically get access to a DC plan, unless they opted out.
“I believe that only with this solution we can reach those employees who really need to save more for retirement,” he said, adding that the cost burden on employers would not be significant.
In the run-up to the federal election next month, both the governing Social Democrat-Green coalition and the Conservative opposition have ruled out making retirement saving of any kind mandatory.
But, according to Rürup, whatever government emerges after the election will still have to settle the question of whether mandatory retirement saving will be necessary.
“This was part of the Riester reforms. It was agreed that if demand for the second-pillar or third-pillar pensions remained weak until 2008, the government would then decide whether to make retirement saving obligatory or not,” he said.