Pure DC in Germany – justification specifications and stakeholders’ feedback

Pure DC in Germany – justification specifications and stakeholders’ feedback


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Speaker: Stefan Oecking

In summer 2017 the new "pure defined contribution pension" system was introduced in Germany. This new regime is limited to Union contracts and incorporates the potential to [revolutionise employers' pensions in Germany] [totally change the German three pillar pension system] in the upcoming decades.

During the last decades pension guarantees from external vehicles such as German Pensionskassen, Pensionsfonds and life insurers became more and more expensive, resulting in reduced guaranteed levels and - due to restrictions on asset allocation by regulation - in reduced returns and benefits provided by these vehicles.

At the same time, the decreasing benefit level of state pension system - caused by demographics - requires more benefits to be delivered by the second and third pillar, i.e. employers' pensions and private pensions, to avoid old-age poverty and allow for a sufficient overall replacement ratio. As the second pillar is often more efficient than private solutions, Government decided to improve the second pillar materially. One instrument is the so called "pure contribution benefit".

The presentation will explain the conditions these pure contribution benefits have to meet and will discuss to what extent these may hinder the success of the new regime.

In addition a comparison will be made of the benefit level that is necessary to keep overall replacement ratio stable and the possible level that is addressed in the tax rules.
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Statements, comments and interviews from / with stakeholders like unions, employers, politicians, press and experts will be summarised and presented.

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