The government of the German state of North-Rhine Westphalia has put forward a draft law to change the Pension Fund Act – Pensionsfondsgesetz – to strip the state’s Pensionsfonds from funds coming from returns and from the state’s budget.

The government intends to cut €343m for Pensionsfonds, generated by expected returns in 2024, to partially finance the state’s pension expenditure included in the budget for next year, it said explaining why it is proposing to change the state’s pension fund act.

Annual returns on the share of assets in the state’s pension fund managed by the Deutsche Bundesbank stood at 2.62% last year, corresponding to a possible withdrawal of pension money of around €343m in 2024, it said.

Moreover, the state’s cabinet wants to cut annual transfers of €200m from the state budget to the pension fund to avoid “inappropriate and overlapping” payments, it added. The Pensionsfonds has received €200m per year from the state’s budget since 2018.

The expenses of the state of North Rhine-Westphalia for pensions for civil servants will increase from €8.4bn in 2020 to €12.5bn in 2040, according to the government – this being key to reorganising the financing of the Pensionsofonds.

The number of civil servants and their families, which also receive pension benefits, was 223,200 in North Rhine-Westphalia as of December last year.

Based on the current calculation, this number will increase to around 234,500 in the coming years, dropping significantly to below 230,000 from 2040 onwards, it added.

The North Rhine-Westphalia Pensionsfonds had assets totalling €13.1bn at the end of 2022, 40% invested in equities and 60% in fixed income.

Rik Steinheuer, chair of the taxpayers association Bund der Steuerzahler Nordrhein-Westfalen, has criticised the draft law proposed by the government, saying: “The planned law seems to be a quick shot to plug budget gaps. Long-term, funded pensions are reduced to a drop in the bucket.”

The association is asking for a further payment into the pension fund and calling off withdrawals now. The government could start withdrawing funds from 2030, according to the association, because only from this point in time civil servants will retire in large numbers.

The latest digital edition of IPE’s magazine is now available

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

More from Luigi Serenelli

Topics