Employment Law30.12.2021 News

Coalition agreement & labour law: company pension provisions

On 24 November 2021, the new coalition agreement of the forthcoming government of SPD, Bündnis90/Die Grünen and FDP was published. In the form of a short series of articles, we would like to inform you over the next few days of the statements contained in the coalition agreement on labour law topics and the concrete effects of the plans. Today’s topic: (company) pension provisions.

The statements

“We will therefore strengthen the statutory pension and permanently secure the minimum pension level of 48 percent (defined before the recent revision of statistics). During this legislative period, the contribution rate will not rise above 20 percent. There will be no pension cuts and no increase in the statutory retirement age.

[...] we will introduce partial funding of the statutory pension insurance to stabilise the pension level and pension contribution rate in the long term. [...] We will also enable the German pension insurance institute Deutsche Rentenversicherung to invest its reserves on the capital market in a regulated manner.

[...] We want to strengthen company pension schemes, among other things by allowing investment opportunities with higher returns. In addition, the social partner model already launched in the penultimate legislative period with the German Act to Strengthen Company Pensions [Betriebsrentenstärkungsgesetz - BRSG] must now be implemented."

(Coalition agreement between SPD, Bündnis90/Die Grünen and FDP, p. 73)

The effects

As discussed during the federal election campaign, the coalition agreement stipulates a minimum pension level. Since pension cuts and an increase in the statutory retirement age have simultaneously been rejected, it remains vague how these plans are going to be realised.

Employers and employees are given a certain degree of planning certainty by the stipulation of the pension insurance contribution rate at a maximum of 20% for the legislative period.

An important step toward securing the pension level in the long term is the plan to introduce partially funded statutory pension insurance with a permanent fund. To this end, a legal basis must be created that regulates, in particular, how Deutsche Rentenversicherung may operate with its financial reserves on the capital market.

Given the low interest rate environment over the past decade, company pensions are to have access to investment opportunities with higher returns. It remains to be seen how this will be specifically implemented for the individual methods of implementing company pension provisions.

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