German pensions industry pins hope on next cabinet for second pillar reform

Germany’s occupational pension industry has been let down by the sudden halt of the second pillar pension system reform process, triggered by a political crisis, as it pins its hope on the next government to build on the groundwork laid out so far.

Speaking at the Handelsblatt occupational forum in Berlin this week, Kerstin Schminke, managing director of MetallRente, the pension scheme of the social partners IG Metall and Gesamtmetall, described the past three years of the current legislative period as “lost”, with coalition partners fighting on reforms, now back to square one.

Looking ahead, it will take time to build a new governing coalition while pension reforms are left hanging for all three pension pillars, she added.

Union IG Metall rejected defined contribution (DC) plans under the social partner model that, according to Schminke, represented a paradigm shift in occupational pensions, without guarantees and employers’ liability, that stocked fear among employees.

“Maybe you need more time and improvements, for example the ones put forward partially through the Second Company Pension Strengthening Act (Betriebsrentestärkungsgesetz II.) It was never said that the social partner model is no longer the basis for discussion,” Schminke added.

Claudia Picker, head of local experts HR at Bayer, looks forward to the next legislative period that could bring further improvements for occupational pensions, with the groundwork prepared through the Second Company Pension Strengthening Act. That is “very good step”, she said during the event.

She regrets the fact that the second pillar reform won’t come with more flexible funding rules for Pensionskassen leading to “better investments”.

The second pillar reform relaxes rules on the social partner model, giving the option of using existing collective bargaining agreements.

“It’s a shame that the Second Company Pension Strengthening Act [reform] won’t come – it would have helped a little,” Marco Herrmann, board member of the pension fund for the financial industry BVV, said, referring to the possibility of using existing models.

He added that BVV is in talks with other interested parties in the industry to expand the social partner model, after taking on board Postbank employees.

Occupational pensions association aba will hand over “straight away” its position paper and critics, already sent to the labour ministry, to a new government, chair Georg Thurnes said.

Next moves

The second pillar reform tabled by the former governing coalition of social democrats (SPD), Greens and liberal party (FDP) foresees an assessment in 2028 of the progress made, with the possibility of introducing an opt-out clause if occupational pensions struggle to expand, a key point for the Christian Democratic Union (CDU), a candidate to win the next election, for a long time, Rolf Schmachtenberg, state secretary for the Labour and Social Affairs Ministry, said.

The state secretary said the next cabinet should smartly move to clear the reform bottleneck, and work on a programme for the first 100 days in office on reforms that are ready, without reopening discussions.

The next government can draw on preparatory work that has been done by the finance and labour ministries on second and third pillar pension reforms.

Occupational pension laws also need a review of investment regulations in private equity and venture capital, said Florian Toncar, former state secretary for the finance ministry, during the event.

He added that the FDP could still vote in support of the draft law to reform the second pillar before the election, but there might not be enough time left to complete the process.

The liberal party has, instead, made clear that it won’t vote in favour of the first pillar reform before the next election.

For the next legislative period, Toncar highlighted the need to address the question of portability of occupational pensions, and the consolidation of different forms of savings.

The government has prepared the third pillar reform but it did not finish the work, leaving open questions regarding the level of tax support, for example.

This means that the next government won’t be likely to implement the draft law put forward by the finance ministry as is, with the Union that will have its own idea on the matter in case it will be part of the next cabinet, Toncar said.

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