Calling pensions Sondervomo-gens by another name would be just as sweet, so the Germans chose Altersvorsoge-Sondervermogen (AS), as their new third pillar product. These came into effect as part of the Third Financial Support Act from April 1. But there will be a number of months discussion about the details between the investment fund industry, which originally promoted the concept, and the supervisory authorities, before plans are offered to the public.

Around 40 fund managers are lined up looking for approval for 70 or so AS funds and July 1 is likely to be the marketing start date.

The AS are notable because of the emphasis on investing in 'real assets', with a minimum of 50% in equity or real estate, though there are ceilings of 75% for equity and 30% for real estate. Real estate can include direct property holdings, as well as real estate funds and companies.

According to observers, fund managers are likely to offer AS with aggressive or defensive allocation strategies.

The funds will not have additional tax advantages apart from those of investment funds, such as freedom from capital gains tax. Managers are required by law to offer a regular savings plan, which must run for a minimum of 18 years, or go to age 60, which brings them into line with the new rules for life policies, which receive tax advantages.

The industry hopes that eventually the AS will qualify for similar tax advantages in the future. We hope it will become a level playing field in the future," says Peter Koenig, director of Commerzbank Asset Management in Frankfurt.

"This is the first time we have in Germany an investment product which is explicitly qualified for pension and old age provision for the third pillar."

Fund groups expect the inflow will be small regular savings initially, so will take some time for groups to break even.

On the second pillar side, the attempt by the banks to have their proposals included in this year's investment law failed, largely because they wanted a level playing field with regard to taxation for these vehicles, with the other methods.

Koenig says: "But all the German political parties have said they are in favour of this product and the levelplaying field. But with the general election due in September, they voted last February in the Bundestag to do it after the election, but even before the fourth financial market law." Fennell Betson"

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