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23 December 2016

Investment & Pensions Europe: German government ignores industry in revised pensions reform draft

The German government has decided against most of the amendments that were proposed for the new second pillar reform law during an extensive consultation phase with considerable input from the German pension industry and other stakeholders.

The new “Betriebsrentenstärkungsgesetz” (final draft in German), which now has an unofficial abbreviation “BRSG”, was presented to parliament.

Industry representatives are still hoping for amendments in this phase of the legislative process given that the government decided to ignore most of their requests for changes to the bill.

The law provides for a new form of pension fund, and with it a pure defined contribution system without any guarantees.

The insurance industry in particular had tried to get the paragraph on the explicit ban of any form of guarantees in the new vehicles deleted from the final draft.

But the government stuck to its initial proposal.

Stefan Oecking, pension expert at Mercer Germany commented on this decision: “Although guarantees would have probably increased the acceptance of a pure defined contribution model it is understandable in the current market environment not to allow them in the new model.”

He confirmed the government had “mostly not considered any of the proposals made by the industry and the social partners during the consultation phase”.

Similarly, Michael Karst, head of legal in Willis Towers Watson’s German pensions department, criticised the final draft: “Especially regarding known weaknesses of the existing occupational pension system, which were mentioned in several comments, there was practically no movement by the government.”

The only one of these changes that both consultancies welcomed in their statements is an increase in the tax-free threshold for employer contributions to second pillar plans.

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© IPE International Publishers Ltd.

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