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IPE special report May 2018

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German government says no to guarantees, insurance exemption

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The government has rejected proposals to introduce guarantees to new pension vehicles to be created under the “Betriebsrentenstärkungsgesetz” (BRSG).

On 10 February the smaller chamber of the German parliament, the Bundesrat, had recommended amendments to the draft law the government had presented in November. The parliamentary body wanted to allow guarantees to be offered in the new vehicles which the government had intended as pure defined contribution (DC) plans.

In a response to the Bundesrat’s suggestion the government clarified in a written statement that it did not want guarantees: “The pure DC plans are intended as an additional offer for those employer and employee representatives who do not see guarantees as protection but as a limitation to designing a pension plan or a hurdle for entering into an agreement on occupational pensions.”

Further, allowing guarantees in these new plans would give insurers a competitive advantage in the market, it was reasoned.

The government added: “Combining pure defined contribution plans with a non-guarantee rule is therefore only a next step.”

The government emphasised that all those who wanted to have guarantees in their pension plans could still choose an existing vehicle.

However, the final decision will lie with the larger chamber of the German parliament, the Bundestag, which is set to hold the first reading of the BRSG draft on 10 March.

The government also rejected proposals by the smaller chamber on exempting parts of the contributions to occupational pension plans from health insurance payments.

The Bundesrat wanted to exempt pension payments during retirement based on employer contributions from health insurance.

But the government calculated that this would lower inflows into the state health insurance system by €2.5bn annually, and declined the proposal.

Regarding other more technical proposals by the Bundesrat, the government promised to look into them.

As reported by IPE, the German federation of company pension plans had also rejected a proposal to allow guarantees in the new pension plans.  

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  • Reichstag, Berlin

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