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Call for Pensionsfonds' liberalisation

GERMANY - Germany's pensions and insurance industry is lobbying the government to either drop or relax a rule requiring equity-oriented pension funds (Pensionsfonds) be at least 95% funded all of the time.

Under existing regulations, sponsors of Pensionsfonds' - whether employers or insurers - must immediately close the funding gap if the funding ratio falls under 5% of liabilities.

However, the employers' association BDA, the pensions association aba and the insurance association GDV argue this requirement harms the competitiveness of Pensionsfonds and have urged in a letter to deputy finance ministry Thomas Mirow this rule be removed or reduced.

"The requirement goes way beyond what is required by the EU pension fund directive and, as such, reduces the attractiveness of German Pensionsfonds against their European peers," the associations said in the letter, a copy of which was obtained by IPE.

"It is hence not surprising that several German firms have chosen foreign pension funds over Pensionsfonds…and even established Pensionsfonds may consider moving their headquarters outside of Germany," they added.

Indeed, German life insurer LV1871 set up a Pensionsfonds in Liechtenstein last February for the benefit of its German employers. Unlike Germany, Liechtenstein does not require its Pensionsfonds to be at least 95% funded.

Instead, should a funding deficit emerge, Liechtenstein requires only that which is in the EU directive - namely the Pensionsfonds unveil a plan detailing how the gap will be closed.

In the letter, the associations urged the German government to follow Liechtenstein's example or, failing that, widen the underfunding quotient.

What to do about the Pensionsfonds is currently being discussed as part of another reform of insurance supervision, known in German as the ‘VAG-Novelle'.

According to aba sources, the government has suggested a willingness to widen the underfunding quotient for Pensionsfonds from 5% to 10%. Yet what ultimately happens is unclear as the VAG-Novelle must be approved by both houses of the German parliament.

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