German policymakers and industry stakeholders are discussing measures – including broader use of opt-out mechanisms – to significantly expand capital-funded pension coverage.
Pascal Reddig, member of Parliament (MP) for the Union alliance of Christian Democratic Union (CDU) and Christian Social Union (CSU) and member of the recently established pension commission (Alterssicherungskommission), said expanding capital-funded pensions is among the goals of the next pension reform.
“If we undertake a major pension reform, we will need more capital-funded [pensions] and we need [to find] a way to ensure 80-90% penetration of capital-funded pensions,” he said, speaking at an event held in Berlin last week.
According to figures published by the Federal Ministry of Labour and Social Affairs (BMAS), the coverage rate for occupational pensions stands at around 52%.
Political parties must reach an agreement on a first pillar that guarantees only a basic level of pension provision, while “everything else must be secured via the second and third pillars”, Reddig added.
Increasing the number of employees covered by occupational pensions is among the tasks of the Alterssicherungskommission.
The commission will assess the possibility of expanding subsidies for low earners, introducing mandatory mechanisms in the second pillar, and measures to expand company pensions in small and medium-sized enterprises, said Mathias Ulbrich, professor at Hochschule Schmalkalden, during the event.
Alliance 90/The Greens is also in favour of measures to increase the penetration of capital-funded pensions, according to MP Armin Grau.
Grau said he “did not disagree” with a 100% target of people covered through capital-funded pensions in the second or third pillars, but underlined the continued importance of the pay-as-you-go system.
The expansion of capital-funded pensions is “fine but it works well only if you have a counterparty”, meaning public pensions, to balance capital market risks, he added.
Beate Petry, chair of the Arbeitsgemeinschaft für betriebliche Altersversorgung (aba), Germany’s association for occupational pensions, emphasised the need to further open social partner models with defined contribution (DC) plans to third parties.
She said aba envisages a “significantly greater opening” of the social partner model in the second pillar reform law introduced this year, adding that the association is calling for further reform during the current legislative period.
Social partners play their part
DC pensions are high on the agenda of social partners seeking to expand occupational pension coverage among employees.
Judith Kerschbaumer, head of labour market and social policy at Ver.di, said the union aims to achieve a steady, nationwide expansion of occupational pensions with the support of employers.
Ver.di is working with Industriegewerkschaft Bergbau, Chemie, Energie (IGBCE) in the chemical sector and Gewerkschaft Erziehung und Wissenschaft (GEW) in education to provide DC pensions under the social partner model, she stated during another event, organised by the union last week.
Ver.di’s head of collective bargaining policy, Norbert Reuter, said the union had revised its principles for providing DC pensions, which will apply to future social partner models.
The union backs a DC plan offered through BVV Pensionsfonds and aims to scale up the model across the sector together with employer representatives.
Gunnar de Buhr, deputy chair of BVV’s supervisory board, said mandatory requirements to offer occupational pensions are necessary, particularly for low earners, alongside substantial employer contributions.
