Achieving further expansion with improved framework conditions

Germany is one of the EU countries with a long and successful tradition of occupational pension provision. As early as the century before last, companies introduced this employer benefit for their employees and have continued to develop it successfully to this day. Together with the statutory pension insurance and private pension provision, occupational pension provision has thus long been one of the pillars of German old-age provision.

The strengthening of funded old-age provision remains necessary. It is precisely in the current capital market environment that the particular strengths of occupational pension provision come to the fore: its very efficient financing options, the high degree of security, its low-cost structures and the risk equalisation possible due to its collective organisation. In addition to its socio-political advantages, occupational pension provision serves a personnel policy purpose in the competition for qualified employees. It helps to attract and retain employees - an advantage that will become even more important in view of the increasing shortage of skilled workers. The company pension scheme can also be used in such a way that the transition from the employment phase to the retirement phase can be flexibly structured.
No further burdens for the company pension scheme
In order to preserve these advantages, occupational pensions must not be further burdened with bureaucracy and additional costs at European and national level. However, additional burdens must also be avoided at national level. This has not always been the case in recent years. For example, occupational pension schemes have undergone numerous legislative changes in recent years that have increased their complexity, raised costs and tied up additional resources for companies. Examples include the new regulations on pension equalisation law, the balance sheet law reform, changes in financial market supervision and additional tax burdens. In contrast, there was not a single noteworthy project to simplify or reduce the bureaucratic burden on occupational pension provision.
Improving the legal framework
The adoption of the Act to Strengthen Occupational Pensions (Betriebsrentenstärkungsgesetz) represents a major opportunity for the spread of occupational pension provision. The introduction of a pure defined-contribution scheme can help to win over those employers to occupational pension provision who have so far stayed away from it in view of the liability risks, some of which are very long-term and difficult to manage. In addition, the pure defined contribution scheme - which has long been possible and customary in many countries - offers the opportunity of a more profitable capital investment. The increase in the tax incentive from 4% to 8% of the contribution assessment ceiling for pension insurance (West), which was adopted with the Company Pensions Strengthening Act, will help to simplify occupational pension provision and, above all, takes account of the increased financing costs resulting from the low-interest phase.
It is disappointing that employers, of all people, who are prepared to take full responsibility for the occupational pensions they have promised, are not to benefit at all from the legal changes. For example, employers who have committed to direct commitments or to occupational pensions via a support fund will be denied the bAV subsidy. In addition, the legislator continues to deny them full tax recognition of their occupational pension commitments - which is probably also required under constitutional law. It is unrealistic for tax law to continue to assume that companies could earn 6% interest despite the current interest rate situation. It is disappointing that employers, of all people, who are prepared to take full responsibility for the occupational pensions they have promised, are not to benefit at all from the legal changes. For example, employers who have committed to direct commitments or to occupational pensions via a support fund will be denied the bAV subsidy. In addition, the legislator continues to deny them full tax recognition of their occupational pension commitments - which is probably also required under constitutional law. It is unrealistic for tax law to continue to assume that companies could earn 6% interest despite the current interest rate situation.
Company pension schemes are largely financed by employers:

Of the total expenditure on occupational pensions of €38.5 billion, employers bore by far the largest share, at around 76.3% (BMAS, 2019s).


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