German actuaries, the employers association BDA and German insurance association (GDV) have taken a position on the second pillar pension system reform, recommending the government review some of the rules proposed to change the social partner model with its defined contribution (DC) plans.
BDA said to finally open up the social partner model to all companies, including those active in sectors without any connection to existing social partner models.
The broadest possible access to the social partner model would contribute to expanding DC plans in small and medium-sized companies that do not yet offer occupational pensions, it added.
“[Otherwise], there is a risk that a majority of employees in Germany will no longer be able to make a DC commitment because the majority of unions have not yet agreed on a social partner model,” BDA said in the statement commenting on the bill to reform the second pillar drafted by the Federal Ministry of Labour and Social Affairs (BMAS).
The government’s draft bill tries to drift away from the strict requirement of the collective bargaining agreements, necessary to take part in a social partner model, but it does not go far enough, it added.
The German Association of Actuaries (DAV) and its branch, the Institute of Pension Actuaries (IVS), see the government’s proposal as a “balanced compromise”, but it is still not possible to join a social partner model based solely on a company’s agreement.
The actuaries are in favour of transferring entitlements accrued in a social partner model to other pension funds, but recommend reviewing the rules on the possibility of building up a new entitlement in a new social partner model without ending an employment relationship, at the same time paying contributions in the old social partner model.
Paying contributions without ending an employment relationship is not yet foreseen in occupational pension laws, the associations added in their statement. DAV and IVS back a flexible design of social partner models, but view key aspects of the proposal critically.
The legislator has tried to build a wall between savings and benefits in DC plans to prevent redistribution mechanisms between generations, but the buffer built through the employer’s security contributions would be deployed for entitlements and benefits.
This weakens the strict separation, and creates the basis to “cross-subsidise” retirees, it said.
For the GDV, one goal of the reform is to lay the ground to strengthen company pension plans as a whole. Therefore, the new law should give employees the right to transfer capital accrued at a DC pension provider, coupled with an appropriate tax regime, it stated.
GDV has also questioned the fact that a “third party” can share the costs to run the social partner model through contributions and benefits of the pension fund providing DC plans, a “pervasive” rule.
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