The demand for “insurance-free” occupational pensions in the form of support funds – Unterstützungskassen – by large and medium-sized German firms remains “consistently high”, driven in part by higher interest rates, making the internal financing mechanism of this type of pension institution attractive, according to association Bundesverband pauschaldotierte Unterstützungskassen e. V.
The number of companies implementing purely employer-financed support funds is increasing, driven in this case by tax advantages offered to employers to establish this type of pension institutions, according to Manfred Baier, chair of the association.
Unterstützungskassen are a way to offer occupational pensions sponsored by companies, and financed either only with employer’s contributions, or through a mix of employers’ and employees’ contributions.
Assets in such support funds are invested in the company, a form of internal financing, or loans given to the firms. That is why Unterstützungskassen are commonly also called “corporate banks”, the association said. These funds are usually set up by companies with the help of consultants.
Industry service providers and consultants for support funds have recorded three record years in a row in terms of revenues, the association said. In 2023, service providers and consultants recorded revenues growth of almost 20% compared with the previous year, it added.
The association also noted that the number of new businesses with support funds in large companies continued to grow, while the demand for support funds in small and medium-sized companies remained high and at the level of previous years.
Baier underlined two main reasons for the increasing demand of these insurance-free pension funds.
“On the one hand, companies want to be better, and more flexibly prepared for crisis situations in the future, thanks to the internal financing effects of the Unterstützungskassen,” Baier said.
Contributions are usually invested in a company or parked in capital markets to maintain liquidity. “With interest rates on borrowed capital rising, support funds are of course an attractive way [for companies] to become more independent from banks,” he added.
On the other hand, Baier added, companies look for new opportunities to position themselves as an employer of choice in a competitive labour market.
Pension funds’ penetration in the workforce in the form of Unterstützungskassen has been on average over 80% for years, according to the association.
The crisis that could affect export-driven companies in Germany this year means that more companies could opt for Unterstützungskassen for crisis management and to stabilise finances, he said.