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Pension coverage falling among German companies

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The share of employees covered by an occupational pension plan is on the decline in Germany, the social and labour ministry BMAS has found.

Between 2001 and 2015 the share of employed people in an occupational pension plan had increased from 38% to 47%.

However, there was a decline between 2014 and 2015 from a peak of 48%.

Although the decline was small in percentage terms, the researchers said it was even more drastic considering that the number of employees in Germany had increased significantly over the last few years.

BMAS conducted two surveys: one focusing on occupational pensions, compiled from interviews with employers and pension providers (in German: “Verbreitung der betrieblichen Altersversorgung (BAV 2015)”), while the other was a broader take on supplementary pensions based on a survey of employees between the ages of 26 and 65 (in German: “Verbreitung der Altersvorsorge 2015 (AV 2015)”).

Both surveys also looked into the reasons why companies are not offering occupational pension plans, and found both parties blaming each other for poor coverage.

According to the employer survey, 67% of companies without an occupational pension plan said their employees showed no interest.

In the employee survey, 47% of respondents said they were not offered one by their employer.

The findings also revealed that many people in Germany were not aware of a legal provision forcing employers to set up a pension plan when asked by employees.

Under the legal framework employers – when asked – are only obliged to set up some form of pension vehicle, it can also be a pure savings vehicle without employer contribution.

Among the employers, 23% said contributions were too high and 22% noted they had not looked into any retirement provision plans.

Asked how they see the number of participants in occupational pension plans developing, employers were very pessimistic: 74% think the numbers will stay level or even decline.

The findings may add fuel to social and labour minister Andrea Nahles’ campaign to strengthen occupational pension by law.

Her law, the “Betriebsrentenstärkungsgesetz”, is currently being debated in parliament.

If it passes, German social partners will be allowed to set up occupational pension plans under collective bargaining agreements without guarantees and they will be allowed to use opting-out models.

This would relieve the burden on employers and force people to think about supplementary retirement provision at the same time.

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Readers' comments (1)

  • It would be very beneficial for German companies to consider using alternative and more innovative retirement and savings options of DC nature with attractive investment strategies for employees. These can be either (a) employee + employers (b) employee only or (c) employer only contributions. Although the contributions will be considered post tax it certainly is an attractive option for employee to save for retirement and for employers as an attractive retention offering.

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