Contributions to German occupational pension plans fail to cover the pension gap arising from cuts to the country’s state pension, according to Willis Towers Watson. In a study of 200 larger companies with pension plans, Willis Towers Watson found that benefits were insufficient to make up for falling payout-levels from the first pillar.
“To completely fulfill its socio-political role as the second pillar of the retirement provision, contributions to occupational pension plans would have to be doubled,” said Heinke Conrads, head of retirement for Germany and Austria at Willis Towers Watson.
She added that this burden could not be carried by the employers alone. Instead, employees would have to start paying more into their pension plans as well.
Currently, only around 45% of companies surveyed said employee contributions were a prerequisite alongside employer contributions.
Like many consultants, Willis Towers Watson is cautiously optimistic that the new legal framework, the Betriebsrentenstärkungsgesetz (BRSG), will improve participation in occupational pension plans.
Apart from introducing new industry-wide pension plans without payout guarantees, subsidies for SMEs, and pension plans for people with lower income, there are also incentives for employees to contribute to their plans.
“The BRSG is also addressing the issue of the currently rather reluctant motivation of employees to participate in financing an occupational pension plan by providing a legal framework for opting-out models,” Willis Towers Watson said.
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