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With the new law, the government wants to lay the groundwork for industry-wide pension plans with more flexible pension promises.
Studies commissioned by the government had shown that many employers were shying away from offering pension plans because of the long-term liabilities and the required top-up payment for guarantees.
The introduction of “pure contribution-based pension plans” (“reine Beitragszusage”), as the draft law puts it, aims to “provide full cost and planning certainty for employers” with regards to their pension liabilities.
In the discussions prior to the publication of the draft, the term “defined ambition” had often been used, or “Zielrente” (target pension) in German. However, the draft now uses “pure defined contribution” as a term.
At a recent conference in Vienna, Heribert Karch, chairman of the German pension fund association aba, said: “We do not need defined contribution systems in Germany, which the people do not want anyway if we have defined ambition, or Zielrente, as we call it.”
However, he generally agreed with the need to relax strict guarantees for occupational pension plans.
Employer and employee representatives will now have to help operate these new pension plans, it said. The new law would require several existing legal frameworks to be amended.
Among other things, the government wants to create “legal certainty” for opting-out models, which, at the moment, can only be negotiated at an employer’s own risk.
If the draft is approved by all stakeholders and parliament in time, the new law is scheduled to take effect from 2018.