Germany’s MetallRente pension plan for the metal industry brought in 4,000 small and medium companies as clients last year, it announced this week.
For 2017, assets in the insurance-based pension vehicle offered by MetallRente – “MetallDirektversicherung” – will be topped up with a net interest rate of 3.35%.
The annual interest rate is calculated by insurance-based pension vehicles in Germany based on capital and actuarial returns, costs, and net inflows.
MetallRente’s interest rate is more than three times the minimum required: by law, guaranteed pension products only have to grant 0.9% interest rate from 2017. The rate was cut last year from 1.25%.
Since the financial crisis the interest rate granted on MetallRente’s guarantee product has steadily fallen from around 5%, along with legal minimum guarantees.
“Given our cost advantages, occupational pensions remain more attractive than traditional, individual saving,” said Heribert Karch, managing director at MetallRente.
He also stressed the metal industry was going against the trend of a dropping share in occupational pension participation revealed by new government statistics – as reported by IPE earlier this week.
“Our share in new occupational pension contracts is increasing year-on-year,” Karch said.
The 4,000 new clients was “the largest growth over the last five years”, the pension fund confirmed.
“The awareness about occupational pensions has increased significantly among SMEs,” Karch told IPE. “But there also seems to be a silent consolidation in the market with some pension providers not growing at all, or only very little, while others – including us – continue to grow.”
Karch warned a recent increase in employers setting up pension plans will not continue at the same rate without reforms. He has repeatedly voiced support for the government’s idea to introduce new pension vehicles without guarantees to ease the burden on employers.
However, the MetallRente example shows that most companies still choose the guarantee option. Only €150m of the group’s total assets are managed in the Pensionsfonds MetallRente is offering. MetallDirektversicherung makes up the vast majority of the pension provider’s total assets of €5.1bn as at year-end 2016.
This is mainly only chosen for very young employees, and the asset allocation profile is adjusted accordingly. For people below 55 the equity quota is between 70% and 80%, while for people above that age it is cut to 45%, and then to 10% just before retirement.
Over the last five years the MetallRente Pensionsfonds returned 8.7% annually and 5.9% since inception in 2003.
Karch said equities were the main source for the performance of this portfolio in 2016.