German speciality chemicals company Evonik is considering extending its defined contribution (DC) plan – EVP 2023 – to its wider workforce, while encouraging employees to sign up for a capital market-oriented occupational pension through an opt-out mechanism.
The MDAX-listed firm, which employs 32,000 staff, introduced EVP 2023 only for new hires starting in 2023 or later.
The plan, structured as a direct promise (Direktzusage) with an 80% contribution guarantee, follows a life-cycle model. Assets are initially invested in Allianz Global Investors’ Allianz Dynamic Multi Asset Strategy fund (DMAS 75), which has a higher equity allocation.
From 25 years before retirement, assets are gradually shifted into the Allianz Dynamic Multi Asset Strategy fund (DMAS 15), with a lower equity share. By retirement, capital is split equally between the two funds.
“With the new pension plan, we have decided to balance investment opportunities on the capital market and risk hedging. Both funds are actively managed by Allianz Global Investors,” Barbara Schneider, Evonik’s consultant for occupational pensions and actuary, told IPE.
Contributions flow into a contractual trust arrangement (CTA), which reinsures pension entitlements and builds funded assets on the balance sheet, providing additional insolvency protection.
“We have been offering deferred compensation through classic direct promises, and we are considering […] the new pension plan for deferred compensation for existing employees. This does not mean to replace existing pensions, but to offer the option of deferred compensation on a voluntary basis,” Schneider added.
Employees are automatically enrolled into EVP 2023 as part of their employment contract, underpinned by an opt-out clause. The contract foresees contributions of 3% of salary through deferred compensation (Entgeltumwandlung).
New staff are enrolled by default but can change the contribution model within their first six months. If no change is made, they remain in the default structure.
“Switching to an opt-out model is one of the differences compared to the old plans. We can provide employees with an occupational pension scheme at a very early stage, which is a crucial lever in capital market-oriented systems,” said Tijo Thomas, Evonik’s head of special pension topics.
So far, uptake has been strongest among younger employees, who tend to accept higher equity exposure at the start of their careers.
“Some employees with an already existing different pension plan from previous years ask to switch to the new EVP 2023 pension plan,” Thomas said.
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