Securities-linked direct pension promises (ertpapiergebundene Direktzusage), a form of occupational pension, fit well with the interest in equity investments by younger generations, increasing the likelihood for companies in Germany to retain employees, or pull in new skilled workers, according to a paper by the Flossbach von Storch research institute.
The direct pension promise of such occupational plans takes both financial and demographic aspects into account, according to the paper.
A direct pension promise plan investing 70% of the assets in equity and 30% in bonds leads to a final capital after a 30-year period of around €220,000, compared to around €125,000 of a bond-only portfolio, it added.
The number of people investing in equities in Germany has steadily grown since 2010, with 600,000 people under the age of 30 starting savings in stocks, and the number of investors under the age of 40 growing by 30% from 3.2 million to 4.1 million, as of 2022, it added.
On the other end, special tax incentives linked to direct pension promises make it attractive for employees to contribute larger sums to the pension plan, the institute added. Corporate pension plans might help fill in positions for jobs requiring the ability of skilled workers.
According to the German Federal Employment Agency (Bundesagentur für Arbeit) the number of job vacancies stood at 699,000 in January. The high number of vacancies reflects the difficulties companies face trying to find workers in a timely manner, the Agency said.
Companies tend to opt for a security-linked direct pension promise that they can offer to all employees with tax incentives.
Siltronic, a Munich-based semiconductor manufacturer, has designed a new occupational pension plan for employees in the form of a securities-linked direct promise – the BAV Siltronic 2023 – based on a life cycle model, with Allianz Global Investors.
Materials company Covestro introduced the direct pension promise in 2021, also based on a life cycle model, moving towards capital/installment payments, giving nominal value guarantee on contributions paid, and fully financed (CTA) through four Spezialfonds and money market funds, according to a company’s presentation.
Siemens Healthineers has started the direct promise “Healthineers Way of Working”, supporting flexible working hours, a balance between private life and work, and part-time options for women and men, with the employer increasing contributions.
Porsche designed its own capital market-oriented pension promise for new employees in 2022.
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