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Germany

7 June 2017

Germany: company pension reform voted in parliament

German labour minister Andrea Nahles (SPD) defended before parliament (the ‘Bundestag’) the second and third reading of a pension reform that was presented as a broad and fundamental provision to guarantee income for the elderly.

The reform, which includes changes to subsidies for smaller companies as well as amendments to tax issues regarding first and second pillar pensions, gives the social partners more freedom to set up and to administer company pensions schemes. The law will come into effect on 1 January 2018.

In the considerations of the pension Bill, it is said that supplementary pensions or second pillar company pensions schemes are not spread even over the different firms and workplaces. Especially workers in SMEs and low-paid workers lack decent pension provisions in this second pillar. Data show that only 60% of the workforce has a supplementary provision beyond the existing first pillar of the state pension. Research reveals that his has led to an increasing volume of low-income earning pensioners. The Bill wants to guarantee a higher level of protection of pensioners through capital covered supplementary pensions. It will enhance the possibilities for social partners to tackle the problem in their collective bargaining. The social partners will have the right to install efficient and sustainable, tailormade pension schemes. Decisions concerning the necessary pension levies, the administration of the funds, the benefits and other arrangements will become part of negotiated company agreements. Partners also can decide on options and opt-out mechanisms. For low-paid workers, a specific model of pension assistance will be introduced. 

The debate in the Parliament led in the second reading to a vote (on 1 June 2017) with a clear majority by the ruling coalition (SPD and CDU/CSU). On the same day, the third reading was concluded with the same majority. The reactions of the social partners went in different directions. During the preparations, the employers’ organisation BDA had stressed the voluntary character of the new system. Nevertheless, BDA also talked about a provision that could motivate employers to take part in a wider application of a decent company pension. Trade union confederation DGB welcomed the reform with the wording ‘the more elderly workers receive a plus on top of their state pension the better’. However, the DGB would have preferred a settlement with a statutory employers’ contribution and with the possibility to make the arrangements general binding. The challenge for the trade unions is now to bargain sustainable and secure provisions and therefore a clear commitment of the employers is needed.

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