Germany state fund model proposals 'well intentioned' but 'incomplete'

State fund model proposals from German political parties are “well intentioned” but have many weaknesses and remain incomplete, according to Germany’s Arbeitsgemeinschaft für betriebliche Altersversorgung (ABA).

Speaking at a lecture, ABA managing director, Klaus Stiefermann, noted that state fund models are “in vogue”, with each of the major German political parties including a more or less concrete proposal in their manifesto.

However, he warned that "extra pensions, share pensions and the like are far inferior to the pure contribution commitment in company pension schemes”.

He also explained that most of the proposals focus solely on capital investments, only include employees and not the self employed, civil servants or members of parliament, also “neglect the performance phase”, emphasising that retirement provision is more than “just collecting and investing money”.

In addition, he said that some proposals are problematic in terms of competition law and regulatory policy if an "over-competitor" is created, enjoying competitive advantages via the employer as a “sales channel” or by being compulsory.

"The administrative costs are calculated nicely, the control effort is not taken into account and a large part of the administrative effort is burdened with the employers,” he added.

Stiefermann continued: "The statutory pension insurance knows self-administration, the social partner model the implementation and control with the help of the social partners, the state fund models do not provide for such a thing, although the employee's money is at stake and the employer has to carry out a large part of the administration.

“The future federal government should avoid such models and instead, as has so often been promised, finally remove the obstacles to the spread of company pensions.

“In the social partner model, for example, the brakes on the collective agreement must be loosened and the requirements for implementation and control must be made more practical. Company pension schemes must not be dead-regulated. And a company pension plan that is fit for the future must be able to react more flexibly to changing economic conditions.”

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