Economic stagnation in Germany is forcing companies to hold on to cash instead of paying contributions into support funds (Unterstützungskassen), one of the vehicles used to provide occupational pensions.
Companies are no longer in a position to weigh the benefits of holding assets in these pension funds amid an economic situation that “is not good”, a spokesperson for the support funds association Bundesverband pauschaldotierte Unterstützungskassen e. V. told IPE.
The number of new occupational pensions relative to existing arrangements in support funds fell to below 10% in 2025, according to figures released by the association. In previous years, growth had consistently stood at around 20%, driven by favourable incentives linked to contributions into these occupational pension vehicles.
Contributions paid by employers, and by employees through deferred compensation, are tax-free during the accumulation phase.
“Therefore the employers often pay much more than they actually should, paying voluntarily matching contributions of 50-60%, and some companies 100%, instead of 15% minimum [required], because they benefit from it,” the spokesperson added.
Assets in support funds remain on company balance sheets and can be used to finance expenditure on fixed assets or to service bank loans.
“It is a win-win situation for the employees and the employers, but companies currently don’t consider building a liquidity cushion,” the spokesperson said, adding that support funds are no longer growing as they did in the past.
The association estimates that nearly 15,000 companies in Germany have established their own support funds over the past 10 years, with assets amounting to close to €50bn.
Support funds are not required to disclose assets under management and are exempt from the supervisory obligations of financial regulator BaFin. Around 200 consulting firms, with a total of nearly 1,000 consultants, specialise in setting up these pension vehicles.
SMEs suffer the most
Last year, 17,604 company insolvencies were recorded in Germany, the highest number since 2005, according to an analysis published by the Halle Institute for Economic Research (IWH).
Higher interest rates and the end of government aid programmes introduced during the COVID-19 pandemic are among the factors behind the wave of insolvencies, reflecting broader economic challenges.
Manfred Baier, the support funds association’s chief executive officer, said pension schemes at small and medium-sized enterprises (Mittelstand) are particularly under pressure from the economic downturn.
“Especially SMEs, traditionally the clients of support funds, focus on securing their existing (business) operations. Pension schemes for their own employees are currently not a priority,” Baier noted.
Support for employer-financed company pension funds for low earners through the basic pension, approved in 2020 during the COVID-19 pandemic, and the expansion of subsidies under the second pillar reform approved last December are not sufficient to reinvigorate support funds during the crisis.
“It is now clear, if it wasn’t already, that insurance-based occupational pension schemes are not crisis-proof. This became already obvious throughout the entire period of low interest rates. Employers are aware of this, which is why the new subsidies offer little help,” Baier said.
