The consultancy cited the failure to note reforms involving the valuation of unfunded pension promises on German companies’ books as one of the studies’ major faults.
It said the studies neglect to address the “discrimination against unfunded pension liabilities”, or Direktzusage, for which a 6% valuation rate on the balance sheet must be applied.
Uwe Buchem, retirement market business leader at Mercer for Germany, Austria and Switzerland, said: “In light of continuously falling discount rates applied under HGB and IFRS, this is unacceptable.”
The consultant noted that unfunded pension obligations still accounted for half of all liabilities in the German occupational pension system and said the issue should be included in any future reform proposal.
It said it was “unconvinced” the German government had “the strength” to act on the proposals contained within the two studies this year, and that the issue of pensions could play a significant role in next year’s federal election campaign in the run-up to the general elections in the autumn of 2017.
“In the end, there might be a postponement into the next legislative period and a more comprehensive reform of the pension system including all three pillars,” it said.
Regarding the outcome of the studies, Mercer said many of the proposals were “to be welcomed”, including a mandatory employer contribution to defined benefit plans.
The consultancy also thinks a “pure” defined contribution (DC) plan could bolster occupational pensions, as “past evidence suggests guarantees have cut in on returns”.
However, it emphasised that any shift to pure DC would require greater public education, as would the auto-enrolment proposal, which Mercer welcomed as a “means to increase participation in company pension plans”.
Fidelity also supported the introduction of a mandatory element in the German system.
Drawing on its experience with auto-enrolment in the UK, it estimated occupational pensions could cover 80-90% of the workforce within two years after its introduction.