Minister involves ABA at highest level
The ABA, the German Occupational Pensions Association, has called on labour minister Walter Riester to defer his plans to scrap deferred compensation in 2008. Speaking at the association’s annual conference in Bonn, the chairman of the ABA Boy-Jürgen Andresen, said he would prefer to see the deferred compensation scheme, remain in place since it benefits both employer and employee from a tax perspective.
Andresen pointed out that the chemical workers’ agreement only runs until 2007 and if deferred compensation is not available thereafter, it is possible the agreement will not be renewed. “This makes longer term planning difficult,” he added.
He called on the government to speed up the process by which the BAV gives statutory approval to the new industry-wide pension schemes. “We finally have BAV approval for the chemical sector’s scheme, but we need to speed up the process so others can get off the ground. Some 15m workers stand to benefit from the new schemes but we need the first batch up and running so that future ones have a structure to build on,” he said.
Andresen says there has been some progress in this respect since Riester has invited the ABA to meet with himself and finance minister Hans Eichel to discuss the issues directly. This is the first time that the ABA has been involved discussions at the federal ministry level.
Speaking at the conference Riester argued that deferred compensation has an impact on the country’s national insurance system, since taking deferred compensation meant fewer national insurance contributions.
However, Andresen felt Riester’s argument is somewhat misfounded: “there may well be some truth in this but you cannot fix the problem of the health service with money in occupational pension schemes.”
Deutsche Telekom was ready to look for managers for the assets in its newly-established pension fund, for which it had just received regulatory approval from the supervisory authority the BAV , the fund told the conference. DT was among a number of new funds that outlined their plans and progress, including The chemical industry scheme, Metalle-Rente, the metal industry plan, BAU for the building industry, Deutsche Bahn and Deutsche Post.
Though the size and asset strategy of the DT fund have yet to be determined, it said had asked consultants Towers Perrin to begin organising beauty parades and to advise on an eventual investment strategy. The company said it will conduct an ALM study once the investment policy has been decided.
DT’s new industry-wide pensions arrangements also include life and disability insurance cover. It has struck partnerships with HSBC, Citigroup, Allianz and Victoria Versicherung to help with this.
Deutsche Post has also announced its new retirement structure. With a potential membership of 200,000, DP has opted to establish a new pension fund to replace the traditional Pensionskassen since the potential returns are far greater for pension funds.
“The growth in the pension fund market and DP’s strong market capitalisation mean that we can achieve much higher returns investing this way,” said a spokeswoman for the fund Deutsche Telekom today.
In his discussion of asset allocation and diversification issues to the well attended Pensionskassen section of the ABA conference, Olaf John of Fidelity Investments in Frankfurt, referred to the developments at the Boots pension scheme in the UK. This was of interest as an extreme case of asset allocation, reversing the now established pattern in Germany of increasing equity exposure, he said
The new international accounting rules, he pointed out, put the focus on not just the pension fund, but also on the company’s balance sheet. This is what German companies have been doing traditionally with the book reserve system. What used to be a complaint about the German system was now being adopted internationally, he noted.
Diversification is not only at the asset class level, but also other levels, such as operational risk, or at stock levels within a portfolio. “It makes a difference if you have 50 or 500 stocks in your global mandate.” There are different levels of diversification in any portfolio. Investment style needed to be examined as well, whether top down or bottom up, he said.
The annual conference attracted the biggest numbers ever to an ABA conference, the organisers said with over 1,000 attending including some 200 invited guests.