GERMANY - Mecklenburg-Vorpommern will become the ninth German province to create a pension fund for its civil servants.

Civil servants and judges joining the province's workforce will be paying parts of their salary into a fund from next year.

"The percentage is not yet negotiated," a spokesman for the ministry in Mecklenburg-Vorpommern told IPE.

"The contributions will be the main source for financing the fund. However, in 2008 and 2009, the province will inject €38m and €25m respectively as a start-up capital."

Mecklenburg-Vorpommern brings the number of German provinces with funded pension arrangements for civil servants to nine out of a total of 16.

But while the province bordering the Baltic Sea is at the moment not thinking about investing the fund's assets on the capital market, the south-westernmost province of Baden-Württemberg is taking a different approach.

The province bordering France and Switzerland has revealed details of the plans to set up a pension fund for new civil servants and judges first announced in May.

Initial capital of €500m will be put in the fund from excess tax income the province has built up over recent years and a sum of €500 per month will be put into the fund for every new employee from 2009 from the province's budget.

Employees will not have to themselves contribute to the fund, which is set up as a buffer fund.

The province can withdraw money to top up its coffers for retirement provision no earlier than 2020.

Funds will be invested in bonds and a capped equity share while asset management might be outsourced, the province said in a press release.

Baden-Württemberg is expecting the number of civil servants and judges to increase from its current level of 87,000 to 130,000 by the year 2030.

In the first year ,the fund is set to grow to around €30m as around 5,000 new employees join the province's workforce every year.

In order to further decrease the burden of public sector pensions on state budgets, some German provinces as well as the federal government are thinking about raising the retirement age for civil servants.

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