The German government, policymakers and occupational industry stakeholders are seeking to channel more pension savings into global equity markets to support economic growth.
Michael Schrodi, parliamentary state secretary at the Federal Ministry of Finance, said the government aims to reach the widest possible audience to encourage greater capital market investment and build “future-proof” occupational and private pensions.
The second pillar reform lays the groundwork for broader adoption of defined contribution (DC) plans and higher-yield occupational pensions among low earners. Meanwhile, a public hearing in the finance committee of the Bundestag examined plans to reform third-pillar private pensions before final party negotiations.
Speaking at the Zukunftsmarkt Altersvorsorge event in Berlin last week, Schrodi said the government plans to tap equity market returns through retirement savings accounts investing in globally diversified exchange-traded funds (ETFs).
“We want to encourage people without capital market knowledge to finalise pension contracts,” he said, adding that lower costs and transparency are key to building trust.
Martin Moryson, global head of economics at DWS, highlighted Germany’s low equity participation, noting that only 14.1 million people hold equity funds, ETFs or shares, according to the Deutsches Aktieninstitut.
“This must change; capital markets bring more [economic] growth,” Moryson said.
Focus on auto-enrolment
Policymakers and the pension industry agreed mandatory forms of second and third pillar pensions are vital as demographic pressures mount on public pensions.
The instinct to reject capital markets to fund pensions remains the biggest deficit in this country’s pension policy, said Carsten Linnemann, member of parliament (MP) for the Christian Democratic Union (CDU).
Linnemann revived the idea of an equity pension, Aktienrente, based on Sweden’s premium pension model, scrapped after the last governing coalition collapsed.
He told IPE that discussions on a mandatory, opt-out, capital-funded pension similar to Sweden’s continue.
Lars Golatka, board member of the pension funds at R+V Versicherung, said mandatory pensions with opt-out options have proven effective abroad.
Hansjörg Müllerleile, co-managing director of MetallRente, the occupational scheme of IG Metall and Gesamtmetall, acknowledged that voluntary occupational pensions have limits, and further measures are needed to reach more workers.
Annika Klose, MP for the Social Democratic Party (SPD), also recognised the limits of voluntary systems, calling mandatory second pillar pensions – financed jointly by employers and employees – a “good idea”.
Armin Grau, MP for the Green Party, argued for strong employer-financed occupational pensions to secure adequate retirement incomes. The Greens also support mandatory private pensions with opt-out rules.
The far-right party Alternative for Germany (AfD) opposes mandatory second and third pillar pensions, citing fears of higher contributions. MP Ulrike Schielke-Ziesing told IPE that while the party supports ETF investments for second pillar pensions, it is sceptical of social partner models offering DC schemes.
