The social partner model offering pure defined contribution (DC) plans is spreading mostly among small and medium-sized firms in the chemical sector in Germany, attracting employees who did not show interest in occupational pensions in the past.
The German Federation of Chemical Employers’ Associations (BAVC), the social partner that started one of the first pure DC schemes in Germany, is currently seeing demand for social partner models for pensions in the chemical sector coming from small and medium-sized companies in particular, but larger companies have also signaled their interest, a spokesperson for the association told IPE.
Forty two companies have opted for the social partner model in the chemical industry since November, when the financial supervisory authority BaFin gave its approval to the ChemiePensionsfonds (CPF) of the R+V Versicherung to offer pure DC pension plans signed by BAVC and the trade union IGBCE.
New contracts for more than 600 employees have been signed so far, the spokesperson confirmed to IPE, mostly new employees who are becoming members of a pension scheme for the first time.
BAVC continues to see a strong demand for information about the social partner model in the chemical industry, with the ChemiePensionsfonds in talks with several companies to join, the spokesperson added.
It expects that the trend will continue this year because the payment of collectively agreed contributions usually takes place in December, therefore companies will make a decision on whether to join the social partner model for pensions in the autumn.
The ChemiePensionsfonds, with more than 120,000 members and close to €1.1bn in assets under management, will diversify its asset allocation by investing in equity indices, looking into MSCI World and Euro Stoxx 600, while also investing in government and corporate bonds, the social partners said.
The portfolio’s equity allocation will vary depending on market conditions, swinging between a minimum of 10% to a maximum of 80% allocation.
The first impact of the Betribsrentestärkungsgesetz
The spread of the social partner model in small and medium-sized firms in the chemical sector is the first tangible sign that the law to strengthen company pension schemes – Betribsrentestärkungsgesetz – is fulfilling its goal five years after coming into force.
The law had the goal of attracting employees and low-earners to sign up for occupational pension plans through targeted measures especially in small and medium-sized companies.
Although the number of active employees entitled to an occupational pension has risen from 14.6 million to 21 million since Germany’s pension reform in 2001 introducing the Riester-Rente, the spread of company pension schemes has fallen slightly since 2015 because the market has not grown as rapidly as the number of employees, according to a recent report of the German Insurance Association GDV.
Almost half (46%) of employees subject to social security contributions in Germany have yet to sign up to a company pension scheme, especially in small and medium-sized companies offering company pension schemes less frequently than large corporations, the report said, adding that second pillar pensions are less widespread in eastern Germany than in western Germany.
According to the Federal Ministry of Labour and Social Affairs, out of 21 million active employees entitled to occupational pensions in Germany’s second pillar pension system, 5.8 million are members of public providers of supplementary pensions, 5.2 million have signed up for a direct insurance contract, 4.7 million are members of Pensionskassen, 4.7 million have opted for a direct promise (Direktzusage) arrangement or are members of support funds Unterstützungskassen, while the remaining are members of Pensionsfonds.
The current government coalition of Greens, Social Democrats and Liberal party FDP has started a discussion (Fachdialog) with unions and industry associations to review certain aspects of the current legal framework of the social partner model.
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