IPE DACH Briefing: Germany’s pension overhaul marks shift towards funded retirement | Analysis | IPE
The recommendations of Germany’s pension commission signal a fundamental shift towards greater funding of both first- and second-pillar pensions.
In its 80-page report, the commission proposes introducing a funded element to the pay-as-you-go state pension through an additional 2% contribution, modelled on Sweden’s premium pension system.
In the second pillar, industry experts are urging social partners to discuss ways to expand defined contribution (DC) pensions, including through auto-enrolment, in a market that remains heavily reliant on defined benefit (DB) provision.
If implemented, the reforms could channel more than €400bn into Germany’s pension system.
The potential inflows into the first pillar would come on top of the estimated €26bn-56bn in annual net inflows expected from the planned reform of private pensions, according to a recent analysis by S&P Global Ratings.
Asset managers, insurers and investment platforms are already positioning themselves to capture a share of the expanding private pensions market.
The reforms are also expected to stimulate Germany’s pension buyout market, as occupational pension liabilities become an increasingly important boardroom issue for companies seeking to de-risk their balance sheets.
The market continues to evolve with new entrants. Private markets specialist One Investment Management has acquired a stake in buyout provider Vedra Pension, while Metzler is preparing to launch its own solution by the end of the year.
The expansion of funded pensions is also being debated in Switzerland following UBS’s proposal to introduce a funded first pillar and move occupational pensions to a pure defined contribution (DC) model.
Industry representatives have cautioned against a fundamental overhaul of Switzerland’s existing three-pillar pension system.
Meanwhile, the Swiss government has amended occupational pension regulations to allow pension funds to conduct repo transactions directly for liquidity management and currency hedging.
In Austria, VBV Pensionskasse has appointed Christian Reiss as chair of the executive board as part of a broader management restructuring across VBV Group.
Items to note:
Luigi Serenelli
DACH Correspondent
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