German banking industry reworks DC framework to design bespoke pension models

The social partners behind the defined contribution (DC) pension offered through the German banking industry’s Pensionsfonds BVV are working to revise their collective bargaining agreement to enable bespoke occupational pension arrangements and scale up the model across the sector.

The employers’ association for the private banking industry, AGV Banken, trade union Ver.di and the German Bank Employees’ Association first agreed to introduce the pure DC option, BVV.MAXRENTE, in 2023.

They are now looking to design a DC model tailored to companies of different sizes, with varying contribution structures, in a bid to expand adoption within the industry.

BVV told IPE that a key aspect of the revised model is greater flexibility in contributions, enabling employers to implement the social partner DC model “in a more tailored and compatible way with existing company pension schemes”.

Simplifying the administration of subsidies for low earners – increased under second-pillar reforms that took effect this year – could also support wider uptake of the model, BVV added.

The pension fund said DC plans underpinned by social partner agreements have significant scaling potential within the financial sector.

According to BVV, collective bargaining coverage – a prerequisite for offering such DC plans – is high in the banking industry, while demand for capital market-oriented schemes and more modern forms of occupational pension provision is growing.

In the first year since its introduction, around 20 companies in the industry decided to introduce the model, with high employee participation rates achieved through automatic enrolment with an opt-out option.

“We anticipate that more employers within the financial sector will adopt this model. We are observing growing interest [also] beyond the financial sector,” said BVV.

The social partner model could also become attractive to other sectors over time, as demographic trends and pressures on retirement systems increase demand for capital-funded pension arrangements.