This week the German parliament (Bundestag) has approved the reform of the constitution to relax the debt brake rules and set up a €500bn Sondervermögen (special fund) for infrastructure investments.
Some €100bn in the special fund, passed just days before the new Parliament convenes after elections held in February, are earmarked for green investments to reach the climate neutrality target, now enshrined in the constitution, by 2045.
The special fund, financed by issuing bonds, is an opportunity for pension funds to hold Germany’s debt with rising yields on the prospect of increasing public debt.
The plan for deploying public capital to revitalise the economy and boost defence spending might help steer institutional capital in critical industry sectors.
For now, German pension funds are tight-lipped on whether they will finance the special fund or the defence sector. They are wary of commenting on political issues and waiting for a clear roadmap on public spending.
But the pension funds are asking the next government to make progress on company pension reforms, and they want the financial supervisory authority BaFin to review the new investment ordinance to further diversify investment portfolios and boost private markets investments.
Progressing on pension reforms means supporting defined contribution pension plans with more aggressive investment strategies, and allowing underfunded schemes to further diversify investments, two measures complementary to the implementation of the new investment ordinance.
The German Association of Actuaries (DAV) has warned the industry not to lose sight of the pension reform while discussions on investments in defence, infrastructure and economic growth are top of the new government’s agenda.
Gundula Rossbach, the president of Germany’s first-pillar manager Deutsche Rentenverischerung (DRV), has criticised the pension plans of the future governing coalition of the Union, the alliance of Christian Democratic Union (CDU), and Christian Social Union (CSU), and Social Democratic Party (SPD), particularly the expansion of a costly mothers’ pension (Mütterrente).
Switzerland’s custodian mandates
In Switzerland, the pension fund industry is relieved by the decision of the National Council, the lower house of the parliament, to reject a proposal to re-tender custodian mandate of Compenswiss, in the hands of State Street, to pick a Swiss bank.
Compenswiss, with total assets under management of CHF46.1bn (€48.9bn), was afraid of retaliation by the US government if the Swiss government proceeded to strip State Street of its custodian mandate.
Publica also defended its decision to stick with JP Morgan as custody bank, saying that Swiss banks are not among the largest global custodian banks offering a vast array of services to pension funds, and that Swiss large banks have gone through many crises in the last two decades.
BVK, which also uses JP Morgan as custodian, says its bank is subject to Swiss laws and regulated by the Financial Markets Supervisory Authority (FINMA).
Items to note:
- The IPE Real Assets Seminar Series 2025 is starting in March 2025, with one event in Quai Zurich Campus, on Wednesday 26 March
Luigi Serenelli
IPE DACH Correspondent
This news briefing was published earlier in the week. If you would like to receive it regularly, on your ‘IPE profile’, go to ‘My Newsletters‘ and select any from the list.
Luigi is IPE's Berlin-based DACH correspondent.
His coverage includes regulation and the latest pensions and investments trends, and, being a native Italian, he also covers Italy’s pensions market.
He has reported from Italy and Germany on international politics and business for European and US publications including USA Today, Bloomberg BNA and for the investigative magazine L’Espresso. He was previously Germany correspondent for Mergermarket covering M&A.View full Profile
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