The law introducing defined contribution pension plans without guarantees to Germany has passed the larger house of parliament, the Bundestag.

The Betriebsrentenstärkungsgesetz (BRSG) was passed on Thursday with the votes of the government coalition, comprised of the social democratic party SPD and the conservative parties CDU/CSU.

Against expectations, both opposition parties – the Green party coalition Bündnis 90/Die Grünen and the left-wing Die Linke – rejected the legal draft as agreed on by the government last week.  

The vote by the Green delegates came as a surprise because party representatives had agreed to the law in a preliminary vote in a parliamentary committee meeting the night before.

The BRSG will for the first time allow the creation of defined contribution pension schemes – also called defined ambition plans – which can be set up by collective bargaining agreements.

Only companies signed up to these agreements will be able to set up the new plans.

However, all companies in Germany will be required to pay money they saved through salary sacrifice arrangements (Entgeltumwandlung) back into those plans.

The Greens and other critics feared this and other changes might increase the burden on smaller companies.

Insurers move to offer BRSG-friendly platform

During the long negotiations on the BRSG over the past year, insurance companies had led the opposition to the ban on guarantees for the new plans. However, it now seems some have found a way to get a slice of the new pension cake.

Five small mutual insurers announced yesterday that they were to join forces and create a pension platform. The so-called “Rentenwerk” is to be set up to provide companies and unions with flexible pension solutions to be implemented under the new law.

Germany’s national competition regulator still has to approve the collaboration between Barmenia, Debeka, Gothaer, HUK-COBURG, and Die Stuttgarter.

The BRSG itself still has to pass the smaller house of the German parliament, the Bundesrat, in its last session before the summer on 7 July.

It is expected that the representatives of the German provinces in the Bundesrat will approve the draft.

However, analysts have said the Green parties’ approval could be crucial in getting the green light from provinces where the party is part of a regional government coalition.

Stephan Oecking, partner at Mercer Germany, called on the companies and unions that will have to negotiate the new pension plans to “make full and quick use of the full range of new possibilities”.

Reiner Schwinger, managing director at Willis Towers Watson Germany, added: “The new framework will fill the current white spots in the German pension landscape.”

Fred Marchlewski, managing director at Aon Hewitt Germany, summed up: “Occupational pensions will become more attractive overall, but also more complex.”

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