GERMANY – The Berlin based German life insurance association is threatening to take legal action against the German government if it presses ahead with its forthcoming pensions reform package.

The association, which has already received backing from German insurance giant Allianz, which says it will support such action, claims that the proposed reforms discriminate against direct life insurance pension arrangements and could be constitutionally unlawful.

Andreas Laut, head of the department of life assurance and mathematics at the association, says that under the proposed reform all of the other four German pension systems, including the new pensionfonds product, will get tax deductibility on contributions, but that direct life insurance arrangements will not be equally treated.

Laut comments:“ We don’t know why the government is doing this.
“ We even think that it is not actually legal to do this. They are saying that the other systems are collective systems and that direct life insurance is not.
“ But that’s not true, they are all collective systems because they are organised by the employer.
“ It is second pillar and in the second pillar you can’t make the difference between singular and collective arrangements.”

He adds that the association is still considering whether it will embark on legal action should the law be passed: “We are thinking about this and we have asked people who work on these things to look at this. They have said that we are right.”
However, he notes that a government committee is currently meeting to discuss the issue, which is currently stalled in Germany’s Bundesrat upper chamber.

The reform bill is scheduled to be heard in the Bundesrat on May 11.

Christoph John, a spokesman at Allianz Lebensversicherung in Stuttgart, comments
“ What Allianz has proposed is that in case the association is not allowed to undertake legal action due to its status as an association, then Allianz would be prepared and willing to undertake this legal action.
“ Not only Allianz but also virtually all other German insurers would take the same view and support this.
“ As German insurers we believe that there is a discrimination in the law as it stands now against direct insurance, because the other four ways to fund German pensions will be tax deductible for the contributions, whereas the same case will not be applicable for direct life insurance.”