Members of German Pensionskassen are ready to give up a certain amount of their pensions for sustainable investments, but pension funds have yet to establish joint decision mechanisms for asset allocation.
A survey conducted by the Frankfurt School of Finance and Management with members of the Pensionskasse Rundfunk, the pension fund for freelancers of German public broadcasters, has shown that members want to jointly decide with their pension funds on how their money is invested.
However, joint collaboration is almost not existent currently, Olaf Stotz, professor of asset management and pension economics at the university, who led the survey told IPE.
“The Pensionskassen still steer their investment policy without considering the demands and opinions of their members. The communication between Pensionskassen investing capital and members has to improve, so that members can jointly decide what happens with their money,” Stotz added.
According to the survey, the majority of the respondents is ready to waive part of their pensions particularly to fight child labour, discrimination and to protect the climate.
On average, members are willing to accept a reduction of their own pension of a little more than €31 per €1,000 in favour of sustainable investments. The survey also showed that 20% of those surveyed do not intend to sacrifice pensions for sustainable goals.
Changing mood on equities
The survey is also offering an alternative view on the widespread opinion that German savers are afraid of investing in equities.
Almost half of respondents agreed with the statement that for younger people an investment in equities, which comes with associated risks, is a good option for old-age provisions.
But currently the majority of providers of occupational pensions in Germany offer only one contract, normally a low-risk occupational pension including guarantees on contributions, without taking into account personal appetite for risk.
The social partner model should open up ways to achieve higher returns, but it can function only with the participation of unions.
“That is an unnecessary hurdle for people who want to invest in equities. Unions are not equity-oriented investors normally,” Stotz said.
He added: “My advice is to review the social partner model, the rules, and eliminate the hurdles to enable a return-oriented tariffs/contract for occupational pensions. The social partner model should be abolished in the current form […] you can choose a return-oriented [occupational pension] contract independently from the social partners.”
The results of the survey give way to initial legislative considerations on how to include investor preferences in company pension schemes in the future.
For Stotz, the Generationenkapital concept, which would lead to investing part of taxpayers-financed first pillar assets in equites, is a step in the right direction, but €10bn is a small step to start the fund.
“Finance minister [Christian] Lindner is aware that the €10bn is a small step, [but] to avoid a 1% increase of the contribution rate, €500bn are necessary. Politically, in the current government coalition, it is difficult to find a majority to support the deployment of €500bn,” he said.
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