The German government’s pension reform package is back on track after the coalition parties came to an agreement on the proposed legislation last week, leaving untouched a proposed ban on guarantees for new defined contribution plans.
The draft Betriebsrentenstärkungsgesetz (BRSG), which is designed to boost occupational pensions coverage, can now resume its passage through parliament.
The draft law will then be debated by the Bundesrat, the upper house of parliament where the federal states are represented. This is planned for early July.
“The draft BRSG is the best thing in a while that politicians have come up with when it comes to pensions,” said Thomas Richter, chief executive of BVI. “With voluntary opting-out, defined ambition pensions, and the ban on guarantees, the social partner model offers advantages for employers and employees.”
Klaus Stiefermann, chief executive at aba, said the German occupational pensions trade body was pleased that the coalition was able to resolve the main points of contention before the summer break and ensure that the law could be passed in its revised form.
He said that aba had had concerns the reform would be diluted in certain key aspects, to the point that it wouldn’t have been clear if the social partner model option would even be taken up.
The “social partner” model is a central pillar of the BRSG. It means sector-wide collective bargaining parties – including unions and employers – can introduce defined contribution (DC) or “defined ambition” pension schemes, with neither the employer nor the pension provider allowed to provide guarantees. Both these aspects were heavily debated by the coalition in preceding weeks. Defined contribution pensions have not been possible in Germany so far.
Stiefermann said a weakening of the guarantee ban was a big concern: “We are happy that this dilution did not and won’t occur.”
Also, the regulation on pension fund supervision is to be amended to require a sufficiently large buffer to be in place when benefits are increased to ensure a fund’s coverage ratio amounts to at least 110%.
According to aba, this would help the pension fund withstand a stock market collapse of 25% without having to cut benefits, even if 35% of assets were invested in equities.
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