Support from the German Trade Union Confederation (DGB), the country’s largest umbrella organisation of trade unions, has added momentum to calls for mandatory occupational pensions as policymakers look for ways to broaden coverage.
DGB chair Yasmin Fahimi said in an interview that unions are ready to underpin collective bargaining agreements for mandatory company pension schemes for all employees.
According to the DGB, around 20 million employees in Germany still do not have an occupational pension plan.
Fahimi’s remarks come at a critical juncture, with the pensions commission (Alterssicherungskommission) expected to finalise its work on wider reforms – including possible mandatory mechanisms in the second pillar – by the end of this month.
In this context, the DGB’s proposal could help the commission assess viable reform options for social partners, said Gunnar Hasselmann, partner at PwC.
He added that the financing question will be decisive, and that any model is only likely to be politically feasible if costs are shared evenly between employers and employees.
The idea of mandatory company pensions is increasingly under discussion across political parties.
Parts of Union – the alliance of the Christian Democratic Union and Christian Social Union – as well as the Social Democratic Party and the Greens, are now broadly open to such a model, though disagreement remains over design, Hasselmann said.
Johannes Heiniz, managing director of retirement at WTW, said the trade union position is “strategically consistent” with existing legislation, which already foresees mandatory measures as a last resort to expand occupational pensions, particularly defined contribution schemes backed by social partners that fail to achieve sufficient coverage.
DGB’s backing contributes to the political legitimacy and social acceptance of mandatory company pensions and could ease their introduction, he said.
“However, this alone is not enough. A coordination with employers’ associations and clarity on the distribution of costs are necessary,” added Heiniz.
Burden risks
Carsten Strube, head of pension at Mercer, said trade union backing would add “political weight” to proposals for mandating employer-funded occupational pensions.
He warned that a blanket mandate would increase coverage but place a burden on small and medium-sized enterprises, and could undermine well-functioning voluntary arrangements.
An alternative approach would be a “balanced policy mix” including stronger employer incentives, such as tax relief, simplified portability of pension entitlements, reduced administrative and liability burdens for employers, and improved decumulation and annuitisation options to support member outcomes, he said.
While the DGB’s proposal has not yet been detailed, some argue it risks adding pressure to employers at a difficult economic moment.
“Germany is currently in the midst of a historic economic crisis. Placing an additional burden on employers in the form of the non-wage labour costs, as demanded by the DGB, would clearly be counterproductive at this juncture,” said Henriette Meissner, pension consultant and lecturer at Koblenz University.
She also raised concerns about implementation in low-wage sectors, smaller firms and among employees with limited disposable income.
“The solution cannot simply be that the employer pays. That drives up the cost of products and services and, in all likelihood, fuels the already high level of undeclared work, or exacerbates Germany’s disadvantages as a business location,” she said.
