One crucial aspect of Germany’s pension reforms has been the way that it has galvanised German employer associations and trade unions into forging their own occupational pension structures.
The size and influence of the German trade union movement – Hamburg-based umbrella union, the Vereinte Dienstleistungsgewerkschaft (ver.di), for example, is the world’s largest trade union – meant that such a move toward covering employee pension rights through umbrella structures was always likely.
As such, this year’s collective bargaining talks between unions and employers have seen pensions discussions move to the top of the agenda.
For the unions, the advantage of having a guiding hand in employee pension arrangements is clear. They can ensure that worker pensions are secure and not unduly risky, while pushing for the investment to respect some of the cornerstone issues of traditional trade union politics such as the International Labour Organisation convention on non-investment in child labour and the acceptance by companies of union rights.
On top of this, union lobbying power can pressure employers to mirror employee pension contributions – a campaign that ver.di, for example, has put at the heart of its pension strategy. Such pressure could be a huge bonus to the government’s plans to encourage individual retirement savings. If employers contribute to a fund or match an employee’s contributions, then the choice for workers will be, in effect, whether or not they want to lose money by not contributing to the scheme.
However, different unions and employers associations have gone about introducing their pension regimes in different fashions. Some have partially disregarded the direction of the Riester reforms to set up their own pension activities.
Axel Schack, managing director of the Frankfurt-based BAVC Bundesarbeitgeberband Chemie, the German Federation of Chemical Workers Associations, explains that the federation decided not to take on the format of the Riester pension system, instead creating its own chemical workers pension fund for employees in the sector.
He explains the difference. “In Germany today there are two systems of changing money into pensions. The Riester system says that the worker used to pay social contributions and then taxes at the time of taking an annuity. Our system works in another way, in that the worker doesn’t pay social contributions and taxes, so our system is more interesting for our members. It’s a little different.”
He adds that a further issue with the Riester system has been the government’s decision to promote only use of Pensionskassen, Pensionsfonds and direct insurance.
“In our fund we include the two other forms of occupational pensions cover – Directzusage (book reserve) and Unterstutzungskasse. These don’t get the Riester tax credit, but they are still very important parts of the German pensions system.”
Schack says that take-up of the fund has been very positive since it was established four years ago.
“We now have 600,000 members saving for pensions through all five forms of German pensions cover. The fund has been very important for the chemical industry and the federation.”
In April this year the BAVC and the industry trade union, the Industriegewerkschaft Bergbau (IG-BCE), which includes the mining, chemical and energy sectors, received the go-ahead to launch the country’s first sponsored Pensionsfond as an addition to the range of pension options on offer.
The move was made with a view to attracting such industry giants as the Henkel chemical company to come on board, as well as the large number of smaller and medium-sized companies throughout the industry.
The decision to set up a pensionsfond under the new pensions law was a joint decision with the union IG-BCE, says Schack: “We worked in co-operation with the union all the way through. The representation on the pension fund board is on a 50–50 basis and there is an investment strategy committee with joint representation. The asset managers are also chosen jointly.”
However, Schack notes that he has mixed feelings on the development of the German legislation: “Ultimately, I think the Riester system will be very successful, because Germany is starting a new form of pensions. However the Riester pension products with the tax advantages are too much work. There is still too much bureaucracy within the system.”
Eventually, he believes the reform of the second pillar will come down to a choice of which form of pensions cover corporations want to choose.
“At the moment there are two models in German industry. The chemical workers and others are using the old form, whereas others are using the new Riester form. We will see which is successful, but I think the model that we are using here will win out.”
In a further significant move, Europe’s largest telecoms group, Deutsche Telekom (DT), struck a collective bargaining agreement with ver.di, whereby it would converted its pension arrangements in line with the Riester pension reform in Germany to include a capitalised pension fund element.
The DT agreement paved the way for the creation of a huge pension fund of more than 150,000 DT employees across Germany. The fund became operational in May. As with other industries, the new arrangement will be offered as a complement to the existing pensionskasse arrangement.
A spokesperson at DT commented: “We hope that the new pension model will encourage people to start putting money aside more independently and to rely less on the overburdened book reserve system.”
Other announcements have included schemes for the construction workers industry (940,000 members), the retail trade sector (1.6m members) and the confectionery industry (50,000 members).
Magret Mönig-Raane, a vice president at ver.di, says the union is in discussion with employers and demanding that they offer contribution possibilities to some form of pension plan.
Mönig-Raane notes that while individuals may wish to take out private insurance contract, the unions aim is to introduce collective agreements to ensure parts of the workforce can access appropriate retirement cover.
Sectors where ver.di has already been exerting an influence includes retail, wholesale, banking and insurance workers. Further sectors where the union says negotiations are progressing includes journalists, printers, airlines, transport and health workers. In all, some 3m German employees could have the possibility to join funded pension schemes if ver.di successfully concludes all its discussions with employers on providing occupational cover.
One dynamic favouring the implementation of union/ employer association-led pension arrangements is the move by banking and insurance groups to court social partners through provision of group retirement plans.
To date though, many of these have been for Pensionskassen arrangements. It remains to be seen how the 1 July reform of the occupational sector will now drive forward the case for Pensionsfond provision.
One area where Mönig-Raane is adamant that the union will keep pressuring employers is on contributions. “We are demanding that this happens, especially that part the employers save because they no longer pay the social insurance.” This, she notes would normally be around 20% of pay.

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