Germany has started work to implement a capital-funded component in its statutory pension system through a permanent fund professionally managed by an independent public body and invested globally, a spokesperson for the finance ministry told IPE.
The German government is intensively working on expanding the statutory pension system to include a capital-funded part to stabilise the level of pensions and the contribution rate for pensions in the long term, the spokesperson added.
Last week, the German finance minister Christian Lindner visited the state pension fund AP7 in Sweden to find out more about the model of the so-called Aktienrente, or statutory equity pension, the spokesperson confirmed, but declined to comment on the content of the meeting with the pension fund.
The finance ministry said in a tweet that Lindner visited AP7 to gather information on the fund and its investment strategy, showing the finance minister talking with AP7 chief executive officer Richard Gröttheim.
The Aktienrente was the flagship proposal put forward by the Liberal Party FDP, chaired by Lindner, during the electoral campaign last year, that specifically looked at Sweden and the AP7 fund as a model.
The coalition agreement signed by the FDP, the Greens and the Social Democrats (SPD) foresees a reform of the first-pillar pension system by adding a capital-funded component with an initial capital stock of €10bn.
According to the coalition agreement, the government will transfer the €10bn to the Deutschen Rentenversicherung, which manages the state pension scheme, from the federal budget in 2022, but so far it is unclear whether the cabinet will kickstart the fund this year.
The spokesperson for the ministry of finance did not comment on when exactly the government will start the fund within the statutory pension system.
During his visit to Sweden Lindner said the government is currently working on key points for the reform, adding: “My goal is to finalise a concept [for Aktienrente] this year.”
Following AP7’s example
AP7, the national pension fund that operates the default option in Sweden’s first-pillar premium pension system of individual accounts, is a defined contribution (DC) premium pension that forms a minor proportion of the overall state pension in Sweden, alongside the larger pay-as-you-go income pension.
Swedes not choosing to invest their premium pension contributions via the privately-managed funds offered on the system’s funds marketplace platform (Fondtorget) are automatically included in AP7’s default lifecycle product Såfa, which is composed of AP7’s two building-block equity and bond funds.
“The purpose of the visit was to give the German minister of finance and his team a greater knowledge of AP7 Såfa, with high exposure to equities and a lifecycle set up with high risk when you are young – and a lower risk when you approach retirement,” Gröttheim told IPE.
He said AP7 was proud to be a good example for Germany to study in considering setting up a DC fund for its reformed pension system.
“It also shows that the Swedish pension system is of good quality internationally,” the CEO said.
Asked about any particular advice AP7 gave to the German government minister, Gröttheim said: “We discussed the importance of looking at a pension system with a long-term perspective and that it is important to pick up the equity risk premium in order to be able to deliver a good pension to the savers.
“We are, of course, happy that we can share the Swedish experience of more than 20 years of investments at AP7 with our German friends,” he added.
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