The Pensions-Sicherungs-Verein VVaG (PSVaG), the mutual insurance association for German occupational pension schemes, will be able to secure employer-financed occupational pensions under new rules in the future if a company goes bankrupt, board members Marko Brambach and Hans Melchiors told IPE.
The German government recently provided a snapshot of what the PSVaG will face under the new rules, which will be required to cover company pensions organised also through Pensionskassen.
In a reply to a parliamentary inquiry of the right-wing party Alternative for Germany, AfD, the executive said the new form of insurance for company pensions is likely to affect three million pensioners and 20,000 employers, with a Pensionskassen total assets worth €111bn.
“For direct promises, the risk for pensioners is qualitatively lower, because the PSVaG steps in only if the employer is insolvent and the Pensionskasse reduces its benefits,” the board members added.
Moreover, the support for Pensionskassen promises is significantly lower because, unlike for example in the case of direct promises, the PSVaG only pays for the part of the pension benefit that has been cut and not for the full pension if an employer is insolvent, Brambach and Melchiors explained.
The PSVaG, however, has not made its own calculation on the numbers of pensioners and employers that will fall under its protection in the future, they added. The full PSVaG protection will be granted to those entitled from 2022.
The new regulation requires companies to contribute to the equalisation fund set up by the PSVaG of an amount calculated in 9‰ (promille), which takes into account the rate for 2021, set at 3‰ (promille), and an additional contribution of 1.5‰ (promille) for the years 2022-2025, as reported.
In its reply, the government highlighted two mechanisms in the Betriebsrentengesetz – a law that protects Pensionskassen in case of an employer’s insolvency – that aim to reduce the contributions burden for the employers.
On the one hand, contributions can be spread over five years; on the other the equalization fund, which is worth approximately €3.1bn, can be used.
The legislator decided the amount of employers’ contribution to the PSVaG based on the assumption that risks related to pension promises defined through Pensionskassen are lower compared to other ways to run occupational pensions, the board members said.
Therefore, the contribution into the PSVaG amounts on average to 20% of a normal contribution, they added.
The PSVaG considers this rule, and the increase in contributions resulting from the new obligation, to be appropriate in view of liabilities.
“The employer has one more good argument to make to the employees to support this form of retirement provision with a high level of security,” the board members concluded.