GERMANY - The German Parliament has approved changes to the insurance law which will give Pensionsfonds greater leeway in dealing with underfunding.

Pensionsfonds will now be allowed to fall to a 90% funding level - 5% more than the current 95% mark.

Furthermore, the supervisory authority can grant occupational pension funds which are not modelled on an insurance vehicle up to 10 years to deal with their deficit, whereas they currently have to get full funding "immediately", according to the law.

Insurance-like pension funds have to get a recovery plan approved by the regulator as soon as they drop 5% below full funding status.

"This amendment will serve as an incentive for international companies to create a pension fund in Germany," commented Klaus-Peter Flosbach, MP for the CDU/CSU government party and member of the financial committee in the German parliament.

Frank Schäffler, MP for the FDP - the only opposition party voting in favour of the bill, - noted the current regulation was a "major obstacle" for the creation of Pensionsfonds.

Flosbach pointed out "all large German companies, that is all listed in the DAX-30 German stock exchange index, are planning to create a Pensionsfonds" for the retirement provision of their employees.

Hans-Ulrich Krüger, MP for the second party in government, the SPD, also suggested the amendment was the final step in the implementation of the EU pension fund directive.

Changes to Pensionsfonds rules had been demanded by the pension industry for several years and industry representatives argued more flexibility in the funding level was needed to render competitive with countries like in the European pension fund market. (See earlier IPE-article: Funds need flexibility to compete with Belgium- aba).

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com