The German government is preparing to draft a law to reform the country’s second pillar occupational pension system following recent talks with relevant stakeholders.
Discussions have shed a light on specific areas of occupational pensions, said Rolf Schmachtenberg, state secretary at the Ministry of Labour and Social Affairs (BMAS), speaking at the annual conference of the German occupational pension association aba in Berlin.
He added that talks are ongoing and results can flow into a law.
It is not yet clear whether the government, and the parliament in a second step, will reform the second pillar pension system through one large law package, or whether the instances will be tackled by drafting separate rules, IPE understands.
Meanwhile, the dialogue process to strengthen occupational pensions has ended on 11 May with a joint round of talks involving the BMAS, the Ministry of Finance (BMF), and various industry associations and experts.
In the past meetings parties have tabled topics relating to labour, financial supervision and tax laws, and further development of the social partner model.
State secretary Schmachtenberg pointed at matters in occupational pensions that need action, noting that there were two core problems: speeding up the process of company pensions among low-earners and smaller companies, and political support within the governing coalition to ultimately implement new measures to reform the second pillar pension system.
“We would be very pleased if this dialogue could be institutionalised, on a permanent basis in the form of an annual meeting of social partners, pension institutions, professional associations and scientists to develop options for the further development of company pension schemes,” said George Thumes, chair of aba’s management board.
Finance ministry supports changes
The German government plans a comprehensive reform of the three pillars of the country’s pension system through the generational capital (Generationenkapital) concept, with a capital stock of initially €10bn to invest in equities in the first pillar, a reform of the social partner model and other changes in the second pillar, and of the Riester-Rente in the third pillar, a push in this legislative period towards a more market capital-funded system.
In the second pillar, the finance ministry considered subsidies for low earners an important point, alongside tax incentives and deferred compensations, looking at the same time at the possibility to change rules on investments for pensions.
“The social partner model is a great innovation, [and[ with the social partner model in the chemical industry, and others on the horizon, it is in our interest to further facilitate [the spread of the model] and to promote it,” Florian Toncar, parliamentary state secretary at the Ministry of Finance, added during aba’s annual conference.
Further regulatory changes to increase the number of employees with an occupational pension fund include opening up collective bargaining agreements, and automatic enrollment with ‘opt out’ choice for other forms of company pensions, Toncar added.
He underlined that it was pure coincidence that Uniper, the first company to set up a social partner model, is under the control of the government that took over the firm last year in a difficult financial situation after gas supplies from Russia collapsed following the invasion of Ukraine.
Company Pension Strengthening Act II?
On the reform of the second pillar pension system, a group of Pensionskassen experts has discussed supervisory topics and investment rules to allow changes with regard to the mix of asset classes invested, said Andreas Hilka, member of the management board of the pension fund for the employees of the Hoechst-Gruppe, and head of the group of experts on Pensionskassen at aba.
Aba is now calling for a second law to further strengthen company pensions – Betriebsrentenstärkungsgesetz II (Company Pension Strengthening Act II) – to update rules that came into force in 2018.
Thumes said a second act is needed, adding: “The current figures on the spread of company pension schemes are unsatisfying. This applies both to the degree of distribution [of occupational pensions among employees] and to the amount of company pensions.”
The share of active employees entitled to a company pension stagnated at 53.5%, the average monthly net company pension is €600 for men and just under €240 for women. Almost 50% of monthly pensions amount to less than €200, around 10% of company pensioners draw a company pension of more than €1,500 per month, Thurnes explained.
The association is also proposing to reform the social partner model by allowing managers and employees to not be bound by a collective bargaining agreement to join it.
“There must be no insurmountable hurdles here, otherwise millions of employees won’t have the chance of [benefitting from] contribution promises in the social partner models,” he said.
Chemical company BASF has not yet signed a social partner contract for pensions, despite the first industry-wide social partner model being set for the chemicals sector, but it is closely following developments, said Beate Petry, BSAF’s head of pensions.
The social partner model set for the chemical industry represents a “super option” for companies with a Pensionskasse or a pension institution to offer pure defined contribution pensions by signing a collective bargaining agreement, she added.
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