German minister optimistic despite pension reform headwinds

No comments

Germany’s labour and social affairs minister is seeking to address “communication problems” she suspects are behind resistance to the government’s pension reform plan as it nears the finish line.

In a streamlined speech to delegates at the annual conference of Germany’s occupational pensions trade body, aba, Social Democrat (SPD) Andrea Nahles reiterated the need for pension reform, but said that headwinds remained.

Particularly strong resistance was coming “from Munich”, she said. She did not spell out what she meant by this reference to the capital of Bavaria, but it is understood to be a reference to the CSU, the Bavarian sister party of the centre-right CDU party, which forms the coalition government with Nahles’ party. The CSU is said to be being lobbied by some insurers seeking a softening of the proposed ban on guarantees under the new defined contribution (DC) plans the law would allow.

The draft law to strengthen occupational pension provision (Betriebsrentenstärkungsgesetz, or BRSG) is in its final stages. The Bundestag, the larger house of Germany’s parliament, was originally due to debate the reform package in final readings at the end of April, but this was postponed until next week – although the last reading could take place in June. In July it is scheduled to go to the upper house of parliament, the Bundesrat. The government wants to have the law passed before general elections in September.

The targeted pensions reform law is set to allow the creation of DC plans, but only with the involvement of collective bargaining parties, in the form of trade unions and employers’ organisations, known as the social partners. In Germany, occupational pensions can take several forms, but all come with some form of guarantee. The proposed law bans guarantees in the context of the DC plans it provides for.

aba has said the ban on guarantees for the new DC plans – if the law is passed and the DC option is taken up by the social partners – must be maintained, i.e. there should be no dilution of the ban on guarantees under the new model.

Nahles said her ministry had worked closely and relatively harmoniously with the finance ministry, led by the CDU’s Wolfgang Schäuble, on the draft pension reform law.

There were two main criticisms made about the reform at this late stage of the legislative process, Nahles said.

One was a fairly sweeping complaint that the social partner model would not achieve the reform’s objective of boosting occupational pensions coverage among low earners and at small and medium-sized companies.

The second concerned the ban on guarantees. Those pushing back against the law were saying they could not imagine this, Nahles said.

Nahles argued that the social partner model was a “win-win”, as although the employer would be released from liability for a given pension promise under the new rules, it would still be tied in as the rules required the involvement of the collective bargaining parties in any vehicle set up to provide a DC pension.

On the concerns about pensions without guarantees, Nahles said she thought “communication problems” were behind this and that she hoped to be able to resolve this in the coming days before the final reading of the law.

She said that capital-funded pension provision without guarantees was “fundamentally new” in Germany but already existed in other countries. She described it as something the country had to face up to.