Germany’s Working Group for Occupational Pensions (Die Arbeitsgemeinschaft für betriebliche Altersversorgung, or ABA) has backed the government’s plan to strengthen company pensions, calling it a “significant step forward".

Despite the praise, however, the ABA outlined a number of areas in which it said further work needed to be done.

These included an increase in severance pay limits, the early claiming of company pensions, the option models for automatic deferred compensation at the company level, improvements to the SPM, and an increase in low-income support.

The ABA also said that, against the background of making employment and retirement more flexible, it supported the amendment to clarify this.

It said: “We welcomed the clarification of the partial release of the loss reserve through an amendment to §193, which gave the highest representations greater leeway. We welcomed and supported the provisions provided for here on the temporary underfunding of pension funds in section 234j (4)–(8)-E, but considered it necessary to clarify the provisions in two places.”

The ABA also said that it welcomed the addition of instalment payments to the provision of benefits by pension funds.

But, it added: “In order to avoid an exclusivity relationship, we suggested that ‘lifelong payment’ and ‘lump-sum payment in instalments’ should not be associated with an ‘or’ in the justification, but with an ‘and’ or at least with an ‘and/or’.”

Beyond these points, the ABA set out a broader reform agenda. One priority was the standardisation of endowment limits in both tax and social security law, at least at the tax level, alongside the long-overdue elimination of the “double contribution” after more than two decades.

The association also stressed the importance of enabling efficiency-enhancing digitisation, reducing bureaucracy, and ensuring that the benefits of data exchange with the German Pension Insurance (DRV) could be extended to institutions involved in company pension schemes.

It highlighted measures to facilitate inventory transfers and to modernise contribution commitments – including introducing minimum benefits and lowering legal guarantee requirements.

In addition, the ABA called for a more appropriate supervisory framework for institutions of occupational retirement provision.

The ABA also pointed to the need for regulatory and fiscal updates. This included the introduction of accompanying rules for the new investment regulation, adjusting corporate tax ceilings for pension and provident funds, and clarifying “pledged reinsurance insurance” arrangements for tax-exempt pension funds.

Furthermore, it proposed creating a modern tax and accounting framework for direct commitments and provident funds, while removing discriminatory rules affecting recipients of parental allowance.

Finally, the ABA advocated for greater intergenerational fairness by allowing fair interventions in existing commitments, promoting retirement provision more strongly than wealth accumulation, and ensuring that capital coverage applied to company and private pension schemes, rather than statutory pension schemes.

Most interestingly, the ABA said that the planned reforms were likely to place a burden not only on those currently receiving pensions, but on the younger generations.

ABA Working Group for Occupational Pensions chair, Beate Petry, said after submitting a corresponding statement to the Federal Ministry of Labour: “The planned pension package will place a burden on the young generation in particular due to higher contributions and stronger subsidies from the state treasury.”

She added: “That is why more intergenerational justice must finally be established with the help of company pensions. More younger employees will need significantly higher company pensions in the future.”

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