GERMANY - Contributions to pension funds by young people are too low and are seldom increased over time, a survey commissioned by the German metal industry pension fund MetallRente found.

One-third of workers under the age of 29 are paying less than €320 into an occupational pension plan, while 13% of all participants only pay the minimum amount, the survey discovered.

Furthermore, the proportion of respondents who increase their contributions over time is even lower: only 4% of members under the age of 19 and 8% of all participants.

Heribert Karch, head of the MetallRente, said this trend was giving young people the illusion they were building a retirement provision when in fact their savings were likely to be insufficient.

While the survey found that young people were generally prepared to save for their retirement, it also found that many were overconfident when it came to their knowledge on the subject and their saving efforts.

Karch also said the German government’s focus on tax incentives for individual third pillar savings might not help to create a sufficient supplementary pension provision and did not make use of collective elements in occupational pensions.

“The question remains whether Germany has not taken a problematic sidetrack, which might not provide an answer to demographic changes without a strong occupational pension pillar,” said Karch.

A positive finding of the survey was that the so-called Entgeltumwandlung, or salary sacrifce - part of the salary converted into pension fund contributions - widely used among young employees.

According to Karch, this form of occupational pension saving is the most efficient to fill the pension gap but currently still “the one that is least prevalent”, making up only one-third of occupational pension contracts in the private sector.

The head of the metal industry fund also covering the electronics, textile, steel, wood and plastic industry would like to see equal tax incentives for all retirement vehicles be they third or second pillar.

Karch is also convinced that, apart from more information and education on the subject, employers who are active in the field of occupational pensions can sway young people into starting adequate saving plans.