Germany’s occupational pensions association Aba has called on the government to accelerate the reform process of the country’s pension system.

“The reform of all three pillars of [our] pension system offers the rare opportunity to pave the way for pensions delivering strong benefits, with a dual pillar of state and company pensions, flanked by private pension provision,” said Aba’s chair Georg Thurnes during the association’s annual conference in Berlin this week.

Thurnes added that “now is neither the time to deny reality nor the time for old battles”, referring to the dispute erupted among coalition partners – the social democratic party SPD, Greens and the liberal party FDP – on the reform package (Rentenpaket II).

“It is the time to demonstrate the courage to reform [the pension system]”, he added.

The battle on pension reforms has escalated within the government coalition after the Finance Ministry, led by Christian Lindner, who is also head of the FDP, blocked the approval of the Rentenpaket II.

“The Rentenpaket II is going in the wrong direction. It aims to guarantee pensioners the current level of benefits, [but] additional funding requirements must be borne by the younger generations. The so-called ‘generational capital’, a type of hedge fund with a manageable capital stock, doesn’t change that,” added Thurnes.

Instead, Aba is calling on the government to reform company pension schemes by, for example, opening up the social partner model, going beyond collective bargaining agreements, to have a “broad impact”, and expanding subsidies for low earners, he said.

For Pensionskassen, requirements for capital investment, funding and risk management have to change, according to Aba.

One of the proposals up for discussion would allow up to 10% underfunding of technical obligations of Pensionskassen, at book value, according to a presentation at Aba’s event by Patrick Paul Huber, chair of the BASF Pensionskasse.

According to the proposal, the underfunding is allowed for a limited amount of time, with the obligation to lay out a plan to cover the underfunding with one or more sponsoring companies, that would “guarantee that [the underfunding[ gap will be closed”, Huber added.

Pensionskassen’s own funds would remain untouched, according to the proposal.

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