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ECJ ruling forces German local authorities to tender pension services

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  • ECJ ruling forces German local authorities to tender pension services

GERMANY - The European Court of Justice (ECJ) has ruled that large German local authorities must tender occupational pension services - and Denmark fears it might be next.

The European Commission (EC) had taken Germany to court over its collective agreement for local authorities, according to which Zusatzversorgungswerke, or supplementary pension schemes, are automatically chosen as occupational pension vehicles.

But the ECJ has agreed that local authorities of a certain size - with more than 2,042 employees in 2006-07 - have breached EU regulations on free trade in services by not tendering mandates for occupational pension provision.

The pressure is now on the union ver.di, which represents public employees, and the association of local authorities to change the collective agreement to include a tendering process.

However, given that the ruling applies to large towns only, German industry representatives believe many local authorities will be unaffected.

Still, in future, Zusatzversorgungswerke will have to take part in the tendering process on pension provision for larger towns.

Hagen Hügelschäffer, managing director of the local and church pension scheme association AKA, told IPE: "We are confident about winning these tenders, as we are on a par with other providers."

He added that research by a German consumer platform for testing financial products had shown that Zusatzversorgungswerke were providing "good services".

Meanwhile, Danish pension fund managers have been trying to reassure clients that the ruling will not automatically be transferable.

Denmark and Sweden had supported Germany in the court case, as their local authorities are also exempt from a tendering process for occupational pension services.

Peter Damgaard Jensen, chief executive of PKA, one of the largest Danish pension providers, said: "The verdict was on German occupational pensions, not the Danish, and there are many fundamental differences between the systems."

He added that while Germany had country-wide regulations on the subject, the agreements on pension provision services were made on a contractual basis in Denmark and that these contracts included the name of the provider.

He called on unions and Danish pension funds to "defend the well-functioning Danish system".
 

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