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German government signals support for auto-enrolment reforms

first_imgThe German government has offered tacit support for the introduction of auto-enrolment, weeks after an independent report proposed its use within industry-wide bargaining agreements.Michael Meister, junior minister at the federal finance ministry (BMF), told the annual conference of German pension fund association aba that a recent state-level proposal for an auto-enrolment-based pension reform was “constructive”.Speaking in Berlin, he also argued that additional retirement savings could either be accrued in third-pillar Riester-accounts, or through improved participation in occupational pensions (bAV).Meister’s support of auto-enrolment was echoed by Yasmin Fahimi, state secretary at the federal social affairs ministry (BMAS), who said auto-enrolment should be seen as part of an additional level of obligation imposed on the employers. The comments come weeks after BMAS published an independent report on the role of industry-wide collective bargaining agreements in boosting participation rates, one that proposed the use of auto-enrolment, offering an indication of the government’s future plans.But they are also noteworthy for signalling long-awaited cross-party agreement on pension reform, as Meister is a member of chancellor Angela Merkel’s Christian Democrat party (CDU), while Fahimi works in a ministry controlled by the CDU’s junior coalition partner, the Social Democrat party (SPD).Meister offered his support for the use of tax incentives to encourage low-income workers to save for retirement, and praised auto-enrolment when discussing a recent proposal put forward by the state government of Hesse.The Deutschland-Rente proposal suggested the use of auto-enrolment, with workers compelled to save into individual defined contribution (DC) accounts – the latter a suggestion heavily criticised by aba chairman Heribert Karch.Meister said the auto-enrolment element complemented talks at the federal level.“The one part where there is a connection,” he said, “is over the question of how far we go in offering an occupational pension I do not have to join but which I have to leave if I don’t wish to be in them.”Opening the conference, Karch called on the federal government to act on pension reform.He said that, unlike the association’s previous criticism of earlier BMAS proposals, which would have mandated the use of IORP II-compliant pension funds to the detriment of many existing German occupational arrangements, the system envisaged by the academic report was one “going in the direction that could lead to a successful reform”.He urged swift action, with a draft proposal published before this summer’s parliamentary recess, and the end of the year seeing “an occupational pension reform worthy of the name”.For her part, Fahimi called for a wide-ranging debate on the interplay between the state pension, occupational savings and voluntary savings into third-pillar arrangements, and a discussion with society at large.“But – and I want to be clear on this – we do not want to indefinitely postpone any decision on reform,” she said.“We want to make a decision. We want to, before the end of the current Parliament [in 2017], table reform proposals.”last_img

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