The planned fund within the first pillar of the German pension system, a first step in the direction of the Aktienrente or statutory equity pension reform, will need a “three-digit billion” sum in the medium to longer term so that returns on equity investments will have a “noticeable impact” and stabilise the level of pensions and contributions, finance minister Christian Lindner said in an interview with the Tagesspiegel newspaper this week.
The finance minister added in the interview that he has ideas on how to finance the three-digit billion sum, but the government has not yet established a “decision-making process”.
Lindner – who chairs the liberal party FDP championing the Aktienrente concept – admitted publicly that the funds the government plans to allocate in the initial phase for the statutory equity pension are not sufficient to achieve necessary returns to pay a certain level of pensions and mitigate the increase in contributions.
The government plans to earmark €10bn initially to the Aktienrente fund that will invest in equities globally, through new debt that will flow into the equity fund as a loan.
“We take advantage of the fact that the state has to pay less for its bonds than returns on capital the markets,” he said.
According to the consumer portal Finanztip, to achieve annual returns of 8%, and have a sizeable impact on contributions and pensions, the government should allocate €212.5bn to the fund.
The government coalition parties foresee that the partially funded equity fund will be managed professionally as a permanent fund by an independent public body to invest globally.
The equity fund will invest in active and passive financial products taking into account sustainability criteria, and react to unexpected changes in capital markets, not excluding certain asset classes such as private equity from the portfolio, according to the report by Capital, citing the idea originated by the Ministry of Finance, already agreed with the Ministry of Labour and Social Affairs, and the Ministry for Economic Affairs.
Contributions are to be transferred to the fund, so that it can invest in companies such as Deutsche Telekom or Deutsche Post, according to the report.
Finance minister Lindner also highlighted in the interview the government’s intention to reform the third pillar private pension system.
“One option is a fund, with the state responsible for it but managed independently of politics,” Lindner said.
The finance minister added that another option to reform the third pillar is to give the choice to save in private accounts with tax incentives.”
The government has set up a “focus group on private old-age provision” to assess whether the idea of private saving accounts is feasible.
The fund industry association BVI has put forward the concept of “special custody accounts” for saving plans with a minimum term of up to the age of 60, and tax incentives on returns made on investments and contributions.
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