GERMANY - The German state of Lower Saxony (Niedersachsen) is to set up a new pension fund for its civil servants from 2010 in an attempt to cut costs.

From 2010 the state will make a payment into the fund for every new employee that joins, although it remains unclear as to how the fund will be run.

A spokesman for the state told IPE this morning that no separate fund is currently in place and that pension obligations are currently met on a pay-as-you-go basis.

The new fund is part of the state's drive to become debt free by 2010, the spokesman added.

Unions supported the idea for a separate fund in the state as early as 2006 when the Social Democrats brought forward the idea.

Lower Saxony is the latest German state or city to establish a separate pension fund for civil servants. Other states include: Rhineland-Palatinate (since 1996), Saxony, Northrhine-Westphalia, Hesse, Hamburg and Bremen.

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