The VFPK, Germany’s corporate pension fund association, has rejected proposals presented by labour minister Andrea Nahles that would make industry-wide pension plans available to insurers.

The topic of industry-wide pension funds has generated heated debate over the past year in Germany.

Nahles recently made public a number of amendments to initial plans for the controversial schemes, dubbed §17b.

Under the new proposal, she said the collective schemes could be sub-contracted to insurers.

She also said the schemes would not have to be set up as either Pensionskassen or Pensionsfonds.

But the VFPK argued that this could lead many companies to reject the traditional vehicles within a collective agreement and instead sub-contract the running of pension plans to insurers.

One reason, it said, could be the fact the insolvency protection scheme Protektor is already in place for insurers,  while the Pensionssicherungsverein (PSV), which covers companies with Pensionsfonds and other directly financed pension schemes, will have to be adjusted to accommodate Pensionskassen – which will “take quite some time”.

The industry group said it was uncertain whether the PSV could even be altered in a way to cover large collective pension plans.

It warned that sub-contracting pension plans to insurers would be the end of traditional employer/employee-based pension arrangements and “render occupational pensions a distribution model” for insurers.

The VFPK said the difference in nature between shareholders and insurance-run pension plans, where fees were higher, would have to be taken into account.

Currently, many Pensionskassen and Pensionsfonds in Germany are run as mutual non-profit institutions.

The pension fund association stressed that it “welcomed” the government’s initial proposal, which said any pension plan established under the new §17b would have to be set up as either a Pensionskasse or a Pensionsfonds.