19 May 2008

IPE: Half of Germans support mandatory second pillar

Only half of employees are making use of the opportunity to contribute to their own occupational pension. One in four bosses are said to actively offer retirement provision and only half of the companies regularly inform their staff about them. 

A survey of German consumers suggests employees would like the state to put pressure on people to make additional savings for retirement.

 

A poll by Delta Lloyd Germany of 1000 employees found every second participant of its study is in favour of making second pillar pension provision mandatory.

 

“The reason is many employees are convinced the majority of citizens will not make sufficient supplementary savings for their own old age pension unless the state is putting pressure on them, using legislation,” Delta Lloyd noted in the report on the survey of employees whose companies offer occupational pension provision.

 

The financial service provider found only half of employees are making use of the opportunity to contribute to their own occupational pension, but Delta Lloyd puts the blame mainly on the employers.

 

Only one in four bosses are said to actively offer retirement provision and only half of the companies regularly inform their staff about occupational pension options, Delta Lloyd noted.

 

“An active employer and lucrative products convince most employees,” the company said.

 

“Many CEOs and board members forget occupational pension is an important tool in recruiting those badly-needed managers and skilled workers, and committing them to the company.”

 

Employees also stated they lack the money to make additional savings for retirement.

 

However, Delta Lloyd found one in three employees thinks the state pension will be enough.

 

Those who do save up are rarely using the full scope of tax deductible contributions, suggested Delta Lloyd.

 

This latest study was published at the same time as the German constitutional court delivered a verdict which might boost occupational pension provision vehicles such as pensionskassen, pensionsfonds or unfunded pension plans against insurance products.

 

Until now, life assurance-type policies could be purchased by an employer for a member of staff and become payable upon retirement, as a lump sum or an annuity.

 

No social contribution would have to be paid for the amount if it was paid out as a lump sum, while payment as an annuity would be subject to a requirement to pay social insurance contributions.

 

However, the constitutional court has now decided all payouts from these direct life asssurance plans, which are mainly used as retirement provision, should be subject to social insurance contributions.

 

Two employees had filed a complaint after being charged fees for social insurance contributions for their lump sum payouts from such a life assurance-type policy.

 

But the court dismissed their complaint arguing both ways of paying out money from these policies should be treated in the same way.

 

Closing the gap which allowed people to avoid paying social insurance contributions renders these life-assurance products less attractive as an alternative to occupational pension vehicles, which are all subject to social insurance contributions during the payout phase.