The political crisis that broke out in Germany after chancellor Olaf Scholz sacked finance minister Christian Lindner has shelved plans to reform the country’s three pillars’ pension system.

Lindner’s liberal party (FDP) won’t support the draft law to start investing first pillar assets in equities to slow down the increase in pension contributions.

The reform drafted is far from the Swedish premium pension model, according to the FDP, which is now dragging its feet after an agreement to change the pay-as-you-go system signed with former coalition partners Greens and social democrats (SPD).

The law to reform occupational pensions is in the hands of the labour and social affairs committee in Parliament (Bundestag), but has not yet been discussed, and the law to reform private pensions, strongly supported by the fund industry, is at a very early stage of the legislative process.

Germany Parliament

Source: Pexels.com

The second pillar reform has already had its first reading in Parliament (Bundestag), and committee hearings should take place in January, while the reform law for private pension provision is only a draft bill

The most recurring word among delegates discussing the current legislative impasse at the Handelsblatt occupational forum in Berlin earlier this month was Schade (shame).

The occupational pension industry in Germany is now hoping that the next government will carry on with the legislation process started by the traffic-light coalition (Greens, FDP and SPD) hailing some of the changes in the second pillar drafted as a step forward.

The next government will have to find a way to spread company pensions especially among employees in small and medium-sized companies that remain sceptical about the social partner model with its pure defined contribution (DC) plans without guarantees for employees, and without employer liability.

The transition to DC schemes in Germany is progressing mostly in large companies, according to WTW. Shipping company Hapag-Lloyd and speciality chemical company Evonik have recently switched to DC, the latter keeping an 80% guarantee on contributions paid.

Switzerland

In Switzerland, the pension fund association ASIP and Publica, one of the largest schemes in the country, have warned of the consequences of higher lump-sum withdrawals, which can weaken the pension system and cause socio-political damage in the long-term.

Swiss pension schemes have started to apply the ESG reporting standard drafted by ASIP, recommending a review, and calling to focus on high quality, key data, expand the range of topics covered, and improve standardisation overall.

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Luigi Serenelli

IPE DACH Correspondent

This news briefing was published earlier in the week. If you would like to receive it regularly, on your ‘IPE profile’, go to ‘My Newsletters‘ and select any from the list.

Luigi is IPE's Berlin-based DACH correspondent. His coverage includes regulation and the latest pensions and investments trends, and, being a native Italian, he also covers Italy’s pensions market. He has reported from Italy and Germany on international politics and business for European and US publications including USA Today, Bloomberg BNA and for the investigative magazine L’Espresso. He was previously Germany correspondent for Mergermarket covering M&A.View full Profile

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