The German pension commission’s recommendations signal a fundamental shift towards increased funding for both the first and second pillar pensions.
In its 80-page report, the commission proposes introducing a funded element into the pay-as-you-go state pension through an additional 2% contribution, modeled on the Swedish bonus pension system.
On the second tier, industry experts are calling on social partners to discuss ways to expand defined contribution (DC) pensions, including through automatic enrollment, in a market that remains heavily reliant on defined benefit (DB) provision.
If implemented, the reforms could channel more than 400 billion euros into Germany’s pension system.
According to recent analysis by S&P Global Ratings, potential inflows into the first pillar would exceed the estimated €26–56 billion of annual net inflows expected from the planned private pension reform.
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 boost Germany’s pension buyout market as occupational pension liabilities become an increasingly important issue on company boards looking to de-risk their balance sheets.
The market continues to develop, new participants appear. 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 discussed in Switzerland following UBS’s proposal to introduce a funded first pillar and move occupational pensions to a net defined contribution (DC) model.
Industry representatives are warning against a fundamental overhaul of Switzerland’s existing three-pillar pension system.
Meanwhile, the Swiss government has amended occupational pension rules to allow pension funds to carry out repos directly for liquidity management and currency hedging.
In Austria, VBV Pensionskasse has appointed Christian Reiss as Chairman of the Executive Board as part of a wider management restructuring within the VBV Group.
Items to pay attention to:
Luigi Serenelli
DACH Correspondent
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