GERMANY – Pensions minister Franz Müntefering has announced that the government will seek a compromise on the EU’s proposed directive on pensions portability that is more in the interest of the country’s pensions industry.

German occupational pensions association Aba bitterly opposes the directive in its current form, arguing that its provisions would drive up costs on German employers and, thus, hinder the further spread of corporate pensions.

“As you know, the German government and parliament is together with you in your opposition to the EU directive. As a result, we will try to reach a compromise when the directive is dealt with by the European Council,” Müntefering told delegates at Aba’s spring meeting in Fulda.

The directive is currently being debated by the European Parliament and then is to go the Council. It is to take effect from 2008.

Müntefering also said the German government agreed with the view expressed yesterday by Boy-Jürgen Andresen, aba’s chairman.

Andresen faults the directive for addressing a “problem of luxury” – that is people who have a corporate pension and can change jobs – yet ignoring the central problem of promoting corporate pensions across Europe.

But regarding another central Aba political demand, namely the extension of a social tax exemption for defined contribution schemes beyond 2008, Müntefering said the government had still made no decision.

Aba feels that the extending the exemption is crucial to the attractiveness of the DC schemes, which were created by the Riester reforms of 2001. The exemption permits employees to, on a tax-free basis, save 4% of salary.

“We will decide the exemption’s fate in 2007. You, the unions, the employers and (leading pension expert) Professor Rürup have made a strong case for the exemption,” Müntefering told delegates.

“I too want saving for retirement on the corporate level to remain attractive. But we have to admit that by providing the exemption, we created a problem as the state pension, health care and employment insurance schemes are missing revenue,” the minister added.

Experts estimate that the exemption causes about €300m in lost revenue annually.

Turning to demographic trends, Müntefering said the government expects that by 2030, there will be only two workers for every pensioner in Germany. “This means that by then those two workers will have to earn enough and pay enough in taxes to support that pensioner,” he said.

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