GERMANY - Occupational pensions are the second-safest way to save for retirement, according to a new poll, yet a separate study shows more employers are switching to hybrid DB/DC schemes.

Only real estate is seen as being a safer investment in the current financial market crisis, German opinion polling institute Ipsos found in a recent telephone survey.

At least 87% of interviewees said they believed property was the safest way to provide for retirement, with occupational pensions following suit with 75%.

First pillar pensions were deemed safe by only 50% and the state subsidised third pillar “Riester-Rente” was rated by 55% of those questioned.

Overall, “every third German is not convinced their savings are safe” despite the guarantee on savings given by the German government, Ipsos pointed out in a statement.  

Interestingly, this appears to conflict with a study by JP Morgan which suggests despite the faith in occupational pensions, few employees are really appreciating retirement provision offered by their employers.

That said, companies interviewed by the asset manager - all of which had more than 3,500 employees and are already offering pension plans - noted information and engagement always led to better acceptance among the employees.

JPMorgan also found more employers are switching from pure defined benefit schemes to hybrid pension models, as 31% of those questioned have done so over the last five years.

Among the 141 companies included in the study, 27% offer pure defined contribution plans and only 9% pure defined benefit plans as the rest have switched to hybrid schemes.

The majority of those employers who have switched (65%) cited a lower financing risk as the main incentive, although 36% argued they did it because they wanted more transparency for their employees.

Binding employees to the company is stated by over 60% of the companies as their main reason for having introduced occupational pension plans in the first place and almost half of the employers said they see a pension plan as a good means of attracting new talents to the company.

Asking further questions about the current financial crisis, JPMorgan said it should not find any negative impact on companies’ plans for additional retirement benefits.

“In the past we have seen corrections in the markets in the wake of which the upwards dynamics were especially pronounced,” noted Peter Schwicht, head of JPMorgan Asset Management Germany.

He cited statistics which showed in the years following the burst of the dot.com bubble markets appreciated 83% between 2003 and 2007, therefore making up for the 38% loss incurred between 2000 and 2002.

“The crisis therefore must not be an excuse to not implement retirement provision. But more than ever it is important to inform people of the risks to investments.”

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

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