Aba looks beyond snap elections for comprehensive pensions reform

Germany’s occupational pension association aba is looking beyond the current period of political instability, hoping that after snap elections a new government will work to reform a pension system where each pillar is well linked to the other.

A new attempt to change the second pillar occupational pension system will likely only be made after the elections, said aba’s managing director Klaus Stiefermann.

“Then, there would be the chance to finally develop a cross-pillar, overall concept [to reform the German retirement system],” he added, commenting on the impact of the collapse of the governing coalition – social democrats (SPD), Greens and liberal party FDP – on the pensions reform process.

Aba recently criticised the private pension reform put forward by the finance ministry, led by former minister Christian Lindner, because it separated the third pillar from the others, state and company pensions.

Some aspects of the third pillar reform, including lower guarantees on contributions paid, and the inheritance of unused pension capital, would damage companies that have slowly started to offer defined contribution (DC) plans under collective bargaining agreements between social partners.

The former governing coalition was trying to make bargaining agreements less stringent to further spread occupational pensions, particularly among employees in small and medium-sized companies.

The three reform packages for public, occupational and private pensions are currently at different stages of the legislative process.

The draft law to reform the first pillar – Rentenpaket II – aiming to stabilise the level of pensions and set up a fund for equity investments, is ahead in the legislative process, with a labour and social affairs committee hearing of Parliament held in mid-October.

Chancellor Olaf Scholz mentioned a confidence vote in Parliament on the draft law to stabilise public pensions as one of the top priorities before new elections, if the government is to survive the pressures of having to hold a snap election sooner than potentially March.

The general secretary of the Christians Democratic Union (CDU), Carsten Linnemann, said that Germany needs a departure from the current government, and that what the country needs on pensions won’t see the light of day under an SPD-led government.

“The reforms for private and company pensions will probably no longer be passed. This is particularly unfortunate for company pension schemes, as there is a large cross-party support”

Klaus Stiefermann, aba’s managing director

In an interview with the Frankfurter Allgemeine Zeitung, Linnemann mentioned the active pension (Aktiv-Rente) model to cut taxes on the earnings of retirees returning to work, to fight the shortage of skilled workers, as part of the programme of a CDU-led government after new elections.

Friedrich Merz, the chancellor candidate for the Union, the alliance between the Christians Democratic Union (CDU), has not categorically ruled out the return of Lindner, the head of the FDP who strongly supported the equity fund in the first pillar and saving accounts in the third pillar, to the post of finance minister in a possible CDU-led government.

The current minority government, supported only by the Greens and the SPD, without the backing of a majority in Parliament, might not succeed in bringing the reforms to the finishing line, especially for the second and third pillars.

“Things are likely to be difficult with the Rentenpaket II. The opposition is against it, and the coalition is broken. The FDP will probably no longer stick to previous agreements and would vote against it,” Stiefermann said.

The second pillar reform has already had its first reading in Parliament (Bundestag), and committee hearings should take place in January, while the reform law for private pension provision is only a draft bill.

“The reforms for private and company pensions will probably no longer be passed. This is particularly unfortunate for company pension schemes, as there is a large cross-party support [for the reform]. Some adjustments would still be necessary, but majorities could be found,” Stiefermann said.

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