The social partners in the German banking industry have agreed on a social partner model to offer employees pure defined contribution (DC) options through the BVV Pensionsfonds, a pension provider of BVV group.
The introduction of pure DC options – BVV.MAXRENTE – comes after more than three and half years of negotiations to sign a collective bargaining agreement by the employers’ association in the private banking industry AGV Banken, the union Ver.di and the German Bank Employees’ Association (DBV).
The decision as to whether to introduce the new model is taken by the companies through agreements involving also work councils and defining certain details, for example the group of people entitled to benefits, the employee’s share of contributions, and funding options, AGV Banken said in a statement.
The share of the employer’s contribution, which increases gradually in two steps over a period of four years, is regulated by the collective bargaining agreement, it added.
Employees make a contribution of at least 1% of the collectively agreed gross monthly salary, AGV Banken said.
For low earning employees, the employer pays the maximum contribution of 2.25% of the gross monthly salary, or 1.65% in companies not bound by collective bargaining agreements.
The BVV.MAXRENTE adds to existing occupational pension offerings, primarily targeting employees who have not yet signed up for an occupational pension contract, BVV said in a statement.
The collective bargaining agreement will come into force on 1 December, subject to full approval by the Financial Supervisory Authority BaFin, BVV said.
The social partners will have a permanent seat in the so-called social partner advisory board overseeing the implementation and control of the products.
The social partner model in the financial industry is open also to companies that have not signed a collective bargaining agreement, and in this case different employer contribution rates apply.
Companies outside the private banking industry, bound to another collective bargaining agreement valid nationwide, can also join the social partner model, with the support of the unions, AGV Banken said.
The BVV Pensionsfonds offers two options to fund pure DC promises, one giving employees the opportunity to invest to achieve higher returns, exploiting the long-term potential of the capital markets, and a more conservative option.
“To design the product, we focused, for the asset allocation, on high-yield asset classes in order to take advantage of the opportunities on the capital markets and achieve higher pension benefits,” said BVV’s chief investment officer Frank Egermann.
Thomas A. Lange, chair of AGV Banken, added: “We are laying the basis to further boost the already high level of [pension] provisions in our industry, with opportunities to achieve higher returns and to engage further employees with company pension systems.”