German corporates are reorganising their pension plans in a bid to win over talent, fight a shortage of skilled workers, and possibly exploiting opportunities offered by new rules for a flexible transition to retirement.
From this year, employees who opt for an early withdrawal of statutory pensions can earn as much as they want, without limits – a rule called Wegfall der Hinzuverdienstgrenzen – against a threshold of €6,300 per year originally, and €46,060 in 2022, in response to the COVID-19 pandemic.
The legislator has spotted the burning issue of the shortage of skilled workers, with the new rule aiming to keep older employees longer at work.
Stefan Grüneklee, head of occupational pensions at Deutschen Bahn, considers the change “positive” to motivate older employers to stay in employment, working for a reduced amount of hours for example. He added that Deutsche Bahn has started programmes to retain older employees and specialists.
Tamara Voigt, head of pensions at Bayer, thinks the new rule triggers a “big rethinking” to design company pensions, adding that “much more is possible”, as employees can continue to work, on top of an early withdrawal of first-pillar pensions, and receive company pensions, all three at the same time, she said at a recent pensions event.
“In a combination of earned income, statutory pension, company pension and, if available, existing time value accounts, companies can design attractive models to shape the transition from working life to retirement,” Rafael Krönung, chief executive officer of Aon Wealth Solutions Germany, told IPE.
He added: “The plans on possible designs are currently still at the very beginning. We will certainly see interesting solutions put in place by many companies in the coming years.”
War for talents
Companies want to win over younger employees and establish themselves as “employer of choice”.
“Adequate protection for employees and their relatives against the consequences of disability or death is playing an increasingly important role,” as well as social security and well-being of their employees after retirement, Krönung said.
Claudia Picker, head of local experts at Bayer, sees that job candidates are soing an increasing interest in retirement provisions but don’t ask about pension planning, and companies will have to prepare for this step with state-of-the-art communication.
Bayer sends information annually to employees, has a pension app, and will join the dashboard Digitale Rentenübersicht next year, she said at the event.
“Employees want pension solutions that offer flexibility during the benefit phase, and to participate in [generating] profit right from the start when drawing a lifelong retirement benefit. In short: modern pension plans are based on attractive investment concepts, are low-risk and efficient,” Johannes Heiniz, head of general consulting in WTW’s retirement department, told IPE.
Rethinking pensions
Thyssenkrupp – a German industrial engineering and steel production multinational conglomerate – has introduced a life cycle model a few years ago for special members.
“If I look ahead, and expect demographic changes, then I would leave these old promises as they are, and perhaps let the higher interest rates have a bit of an effect and invest in communication with workers,” said Marc Welp, head of the company’s pension management.
Firms have put existing pension plans to the test during a period of low interest rates, with new pension commitments mainly introduced for new entrants, Aon’s Krönung said.
He lists two types of new pension commitments, one with pension schemes linked to the performance of capital investments in direct pension promises (Direktzusagen), and insurance-based solutions.
Siltronic, the manufacturers of silicon wafers for the semiconductor industry, has designed a new occupational pension plan for employees in the form of a securities-linked direct promise – the BAV Siltronic 2023 – according to a company’s presentation.
Allianz Global Investors invests the firm’s assets in capital markets in the form of a life cycle model according to an employee’s age and are managed in an insolvency-proof trust, it added.
Bayer is looking at old promises, thinking of new employees, and how to design occupational pensions under the existing framework, for example re-examining the relation between the Pensionskasse, and the direct promises (Direktzusage), Picker said.
Porsche also introduced a capital market-oriented pension promise for new employees last year.
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