GERMANY – US global custodian State Street Bank, is partnering giant motor group Volkswagen in developing and implementing a new company-wide defined contribution (DC) pension scheme.

There are no details yet available about the initial or eventual expected size of the scheme or about the existing Spezialfonds arrangements, whereby employees are rewarded for overtime with investment credits in the current pension plan. State Street has been custodian for this plan since 1997, through its Munich-based operation.

The new scheme is expected to be a multi-manager model with a mixed asset class investment strategy.

The Volkswagen group employs over 300,000 worldwide but the scheme is only likely initially to be open to the domestic German workforce, which is a sizeable force in its own right, says Corinna Linner, senior vice president and managing director of State Street Munich. “We’re talking about a huge pension fund here which will be established in line with the new pensions reform in Germany. This is a new environment we are entering.”

Linner believes that the new fund comes at a time when regulations and restrictions covering the German pension fund market are no longer compatible with the increasing flexibility and mobility that is required of employees.

“Reforms to the pension fund system in Germany are now enabling companies to set up additional pension funds alongside existing ones,” says Linner. She points out that the advantage of a DC scheme is that it makes calculating and financing future company pensions easier since employers are no longer committed to fixed pension models.

State Street Corporation is one of the world’s largest global custodian and investment companies with $6.1trn (€6.9trn) under custody and $727bn (€826.9bn) under management.