GERMANY - Allianz Global Investors has won one of its first investment mandates for so-called working time accounts, from industrial firm SICK AG.
Working time accounts are an innovation, pioneered by carmaker Volkswagen in 1998, which AGI says has enormous growth potential in Germany.
The accounts enable employees to save the monetary equivalent of overtime hours, unused holiday, cash bonuses or a portion of salary to help finance retirement or any time off from work. The savings, which can include matching funds from an employer, are tax-deferred.
Until recently, the innovation had not been widespread in corporate Germany, which is dominated by small- to midsize enterprises (SMEs). Apart from VW, only a handful of big German firms like Deutsche Bank and the German arm of Hewlett-Packard had offered them.
AGI said SICK, which produces sensors for industrial use, had mandated it to manage assets linked to a working time account set up at the firm. According to AGI, 300 of SICK’s 4,000 employees have so far decided to use the account, yielding a volume of 500,000 euros.
AGI said it was investing the assets from SICK’s working time account according to a life-cycle model involving equities, bonds and cash. “The model entails the active use of a value guarantee concept, so that neither the relevant equity quota is exceeded nor is there great volatility in the portfolio after the investor is above the age of 50,” the firm said.
Elaborating on the asset allocation, AGI said that if, for instance, a 25-year-old SICK employee opted for the “growth approach” to investing, 95% of the assets would be invested in equities and the remaining 5% in bonds.
Once the employee turned 50, the equity quota would be reduced to 60% and the bond quota raised to 40%, AGI said. By the age of 59, all of the assets would be invested in fixed income and cash, it added.
AGI also said working time accounts would become increasingly important in corporate Germany, as “firms consider what corporate benefits to offer their employees amid difficult market conditions and an ever-changing economic outlook.”