MetallRente, the joint venture between the metal employers’ association (Gesamtmetall) and the metalworkers’ union (IG Metall) has been heralded as one of the most innovative occupational pension funds to come out of the Riester pension reforms. At the beginning of September the organisation had more than 500 companies under contract representing more than 700,000 employees - a number which is increasing daily.
In late 2001, MetallRente appointed German insurance giant Allianz to lead a consortium of managers including Victoria Versicherung, BHW and WestLB to run the assets of the scheme. The consortium provided the kind of cover that MetallRente had highlighted as its main criteria for the scheme’s creation. It wanted easy administration for employers and real cover for employees.
MetallRente has three main characteristics which make it an example in which the special system of the German collective bargaining policy can be very successful in meeting the interests of both sides.
First, it is not a compulsory system within its sector, so it has to compete with other market participants. Therefore it has to provide a very comprehensive and reasonably priced product.
Second, MetallRente is a prime example of how the Riester reforms can be made to work for both employers and employees. On the one hand the employer facing the new Riester reforms has a very big interest in finding solutions which make it easy and safe to manage the administration of pensions under the new law. On the other hand, employees are looking for safe, cost-effective pensions. Under MetallRente’s offer everything is designed strictly according to the collective agreements in their sectors. This means that employers will not be exposed to claims from employees that they cannot meet.
Thirdly, the philosophy of MetallRente is not simply to make an offer inside the life insurance market, but to provide a real replacement to the former legislation – this means including insurance against disability, dependants and survivors – the biometric risks.
MettelRente’s system of industrial relations combines the effect of the market driven offer with the effect of a good regulation that can be looked after by the big associations in Germany.
MetallRente offers Pensionskasse, pension fund and direct insurance through defined contribution (DC) and defined benefit (DB) pension plans. The decision to offer the scheme as DB or DC is taken by the employer, the employee has to decide the best way of subsidy.
MetallRente is an exception in the market as it offers two types of Pensionskasse (PK) – an insurance type as well as a funds-driven PK. MetallRente is the only scheme in Germany that offers this dual Pensionskassen system.The insurance-driven PK enables a sort of DB plan. The funds-driven PK is designed as a DC type plan with the guarantee of paid contributions.
The latter fund mixes a secure segment to protect employee contributions with a ‘free’ segment where the fund can seek out returns. The first part is done through insurance techniques so it is in an account with a guaranteed interest rate of 3.25% and can always protect the paid contributions.
The second part is a ‘free’ asset management portion, which has a portion of shares and fixed income. These two parts of the employee contribution are strictly separated and cannot be mixed or transferred.
MetallRente has taken all of the available opportunities within the new law. The MetallRente pension fund shows the guaranteed part of employee contributions ‘collectively’ which means that there is not the need for so much in the guaranteed part as when it is provided individually. Furthermore, the guaranteed element does not have to be an insurance supported portion; it can be done as a savings account, preferably with fixed income strategies. Members can get the same security as a funds-driven PK, but they can simultaneously have more activity on the capital markets.
The fund also has a dynamic concept to securing values: the ‘guaranteed’ and ‘free’ asset management portions of the pension fund can vary and if capital markets decline it can simultaneously increase the guaranteed parts of the contributions, or vice versa, which effectively means it can float between two accounts.

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