GERMANY – So-called ‘deregulated’ Pensionskassen will have to create a supervisory board for their business and disclose to what extent, if at all, they are engaged in socially responsible investments (SRI).
Deregulated Pensionskassen are pension funds that are allowed to step out of their traditional role of serving a specific company and compete for the pensions business of any industry. Those that chose to remain ‘regulated’ in that they will continue to serve only a single company, are exempted from the new requirements.
The new requirements, which will come into force on 1 January, are part of the legislation transposing the EU pensions directive.
The law was unveiled by Reinhard Laars of the German regulator BaFin during a meeting of German occupational pensions lobby aba on Friday. Laars is helping to co-ordinate implementation of the law, known as the VAG.
VAG also sets new capital adequacy requirements for deregulated Pensionskassen and stipulates that they respect labour and social standards enshrined in Germany’s occupational pensions law.
One such standard is a full guarantee of an employee’s retirement savings, although many Pensionskassen go beyond this and provide a guaranteed rate of return.
As a whole, Pensionskassen account for 21% of the €366bn in German corporate pension assets.
Separately, VAG contains provisions aimed at boosting the competitiveness of Pensionsfonds – the German equivalent of Anglo-Saxon pension funds. Launched in 2002, Pensionsfonds have attracted at most €400m in corporate pension assets.
VAG makes it far less costly for companies to remove pension obligations from their balance sheets and transfer them to a Pensionsfonds.
VAG also seeks to make Pensionsfonds more attractive by permitting a lump-sum payout of an employee’s accrued pension benefit when he or she retires. The lump-sum equals 30% of the employee’s benefit.