German small and medium-sized enterprises (SMEs) support mandatory occupational pensions, particularly to improve retirement outcomes for low earners.
According to a study conducted by Generali Deutschland’s broker insurer Dialog Lebensversicherung and F.A.Z. Business Media, 81% of SMEs agree that the situation for low earners will not improve without compulsory participation in company pension funds.
Mandatory company pensions would also increase market penetration among smaller firms, respondents said.
Coverage is declining across top management, middle management and employees, particularly in smaller companies with 50-100 staff.
The fall is mainly driven by reduced demand for purely employee-financed occupational pensions based on deferred compensation, according to the study.
“Energy, mobility, and shopping have become significantly more expensive in recent years, leading employees to be more hesitant when it comes to saving for retirement,” Björn Feigl, occupational pension expert at Generali Deutschland, told IPE.
Employer-financed company pensions are also stagnating, while schemes financed jointly by employers and employees fell by 2 percentage points year-on-year to 76% in 2025, the study shows.
“A stronger commitment from the employers is also necessary to make pension benefits more attractive,” Feigl said.
Employers cite complexity, insufficient tax incentives, and economic and geopolitical uncertainty as key barriers to expanding occupational pensions.
“Reforms to company pension law are necessary to break this cycle,” he added.
Scepticism over DC pensions
Second pillar reforms introduced this year aim to expand defined contribution (DC) plans underpinned by collective bargaining agreements among SMEs.
However, SMEs remain sceptical about extending social partner DC models to companies not bound by collective agreements. Only 39% of respondents believe DC adoption would improve without such agreements.
“A stronger commitment from the employers is also necessary to make pension benefits more attractive”
Björn Feigl at Generali Deutschland
The social partner model is discussed in only a limited number of firms.
Just 8% of occupational pension experts surveyed reported internal discussions on the social partner model and DC plans.
According to Feigl, greater legal certainty on guarantee levels for DC plans, simpler transfer rules, unrestricted opt-out options at company level, and improved tax incentives for low-income earners would reduce complexity and boost uptake among SMEs.
Pensionskassen and Pensionsfonds gain ground
SMEs are increasingly targeting low earners – including graduates, part-time workers, parents on parental leave, and those with irregular incomes – for occupational pension enrolment.
Around one-fifth of SMEs in Germany currently design schemes specifically for employees at risk of old-age poverty.
Pensionskassen are gaining traction, particularly among companies with 250-500 employees. In 2025, 53% of SMEs used this vehicle, up from 46% in 2024.
Use of Pensionsfonds has also risen, increasing by 2 percentage points to a record 24% in 2025, mainly among SMEs with 50-250 employees.
Firms select occupational pension providers based on track record, product offering, and service quality.
The study notes that companies expect providers to deliver robust asset allocation strategies and streamlined administration.
