GERMANY – The government has approved a draft law paving the way for the creation of a pension fund for federal civil servants hired after January 1, 2007.

According to the interior ministry, which unveiled the draft law, the size of the new fund will be agreed between itself and the finance ministry “on the basis of actuarial calculations”.

“As a result of the move, the financing of pensions for newly-hired civil servants will shift to a capital-based system from a pay-as-you-go one,” noted German interior minister Wolfgang Schäuble.

The ministry added that the Bundesbank, Germany’s central bank, would manage the assets from the future pension fund. It did not disclose further details.

The federal pension scheme, which covers civil servants as well as judges and soldiers, is currently defined benefit with pensions financed via tax money and other government revenue.

According to statistics provided by the opposition Green Party, the government spends €4.8bn on pensions for its employees. These costs are to rise to €6.2bn by 2020 and to €9.2bn by 2040, the statistics reflected.

The government’s decision to create a pension fund follows calls for the move made last spring by the budget committee of Germany’s Bundestag, or lower house of parliament. The committee said the fund was essential to reduce costs related to the government’s pension scheme.

The draft law must still get the blessing of the full Bundestag – where the governing Conservative CDU/CSU and Social Democrat parties have a super-majority – to take effect.

In 1996, Rhineland-Palatinate was the first of Germany’s 16 states to create a pension fund for its civil servants. Since then, Saxony, Northrhine-Westphalia, Hesse, Hamburg and Bremen have followed suit, and Bavaria plans to join this group soon.

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