GERMANY – Deutsche Bank has outlined improvements for the German pension system including a move to defined contribution, and greater allowances for the new Pensionsfonds.

In its regular report on Germany, called Current Issues, Deutsche Bank suggests five areas where action is needed in order to prepare the occupational system for “expansion, increased capital market orientation and the highest possible cost efficiency”.

One area is to “allow pure defined contribution commitments” which “would release companies from the cost and risk burdens of a defined benefit commitment”. This would establish a calculable basis for the employer contributions towards the occupational pension scheme for small and medium-sized companies, says the research.

Deutsche Bank is also recommending an improvement of the legislative framework conditions for the transfer of pension provisions to external vehicles.

Deutsche says that the new Pensionsfonds can only gain significance if companies are allowed to have surpluses. And it says there should more freedom of choice in relation to disbursement during old age. In addition, obligatory contributions to the pension insurance society (PSV) should be reviewed.

Finally Deutsche suggests the introduction of a new “personal” pension fund, structured as an investment trust as the American model, and a level playing field regarding the taxation of the different pensions products.

The report is called: “Current Issues, More Growth for Germany”.