Germany’s prohibitive 10-year pension vesting period is to be cut in half under proposals being considered by the government ahead of next year’s pension reforms.
The mooted new vesting time of five years from age 30 for all employees will alleviate a situation whereby workers frequently changing employment could sometimes find themselves without any pension rights at retirement.
Norbert Rössler, managing director at Buck Heissmann in Germany, says vesting will also switch to a system known as ‘cliff vesting’ – meaning that an employee’s earnings are vested and then calculation is based on the pro rata principle, ie, what the person would have received on retirement then pro rated to give the vested amount.
“This is unlike the US system, for example, where the vesting starts with 20% and increases incrementally. “
“Employers which take mobility of labour seriously should be in support of this change.
“ There is opposition to everything, but in fact there are companies which have better vesting rights than the legislation,” he notes.