The German Green Party (Bündnis 90/Die Grünen) will keep the reform of the first pillar equity pension fund – Generationenkapital – pushed by finance minister Christian Lindner and his liberal party FDP, in check, while making sure that, in the upcoming parliamentary process to approve the draft bill put forward last week, the construct follows the law.

“The Greens and the SPD [Social Democratic Party] will change the law if the FDP will try to let contributions flow to finance the Generationenkapital. We don’t want that in the future contributions are paid for the Generationenkapital. We would ask to explicitly include this in the law,” Markus Kurth, Green Party’s member of parliament (MP) responsible for pension policy, told IPE.

The Greens also demand that Parliament (Bundestag) controls the foundation generational capital (Stiftung Generationenkapital) regularly, and each tranche that will be paid to the foundation to be approved in Parliament or at least in the budget committee (Haushaltsausschuss), Kurth added.

The foundation will build up assets receiving €12bn in 2024, with the sum increasing by 3% every year to reach €22.3bn in 2045, taken as credit by the state, and additionally €15bn until 2028, to pay out €10bn as dividend from 2040, every year. This will slow down an increase of the contribution rate to 22.3%, from 18.6% today, according to the draft bill put forward last week.

The foundation’s goal is to generate return by managing the assets to stabilise the contribution rate in the first pillar pension system in the long term.

“The plan of the Generationenkapital is based on a very optimistic outlook in terms of returns, 5%, to finance the dividends of €10bn, predominantly through credit carrying interest rate, with the capital that has to remain at a certain value in real terms, taking into account inflation too. It is not realistic,” Kurth said.

Kurth believes that it is important that the level of pension is stabilised in the long term at 48%, a measure part of the reform package, but the Generationenkapital can only contribute to a part of the expenses for pensions.

“It is a drop in the ocean. It is not changing the system,” he said.

The Greens will support the draft law in the upcoming parliamentary process that will start, but open questions remain.

“There are still open questions, for example, on whether the financing is in line with the EU state aid law, because the [Generationenkapital] fund receives credit based on favourable conditions, that other financial players, for example hedge funds, working with the same mechanism, do not have,” Kurth added.

The MP for the FDP, Pascal Kober, responsible for labour market and social policy, has called instead to speed up the parliamentary process on the pension reform, saying in an interview with Tagesspiegel newspaper that the “resistance from economic minister Robert Habeck (Greens) has already taken up time. The project must therefore not be further delayed in the parliamentary process for ideological reasons.”

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