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Germany Introduces Pension Reform Legislation |
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 The German government has introduced pension legislation that would
create a new type of occupational pension scheme
in the nation.The pension legislation also would amend the current occupational
pension schemes. This part of the legislation was passed by the lower
house but was rejected by the upper house of Parliament and is now in
the conciliatory committee.
The pension legislation is currently being debated in the lower house of the German Parliament (Bundestag).
The proposed pension legislation would create a new type of
occupational pension scheme-"pensionsfonds" in which employees may
contribute up to four percent of their salary (in 2008) exempt from
tax. Apparently, three products would be eligible for the system:
mutual funds, bank products, and insurance products. Retail mutual
funds could not be used for the pension scheme, and special funds must
be created. The funds also must be managed by a German management
company.
The proposed legislation apparently imposes more flexible investment
rules on pensionsfonds by moving away from restrictive quantitative
investment rules to qualitative investment rules. The proposed
legislation does not currently provide details of the investment rules.
As a result, the specific investment requirements and restrictions
remain to be seen.
The proposed legislation would require pensionsfonds to guarantee
capital upon retirement and to insure against longevity risk. To
provide for longevity, pensionsfonds would have to pay either an
annuity upon retirement or a lump sum that must be used to purchase an
annuity. There also may be discussion of coverage of other biometric
risks (disability and premature death), and coverage of these biometric
risks may be incorporated into the legislation.
Washington, DC, April 6, 2001
Obtained from the Investment Company Institute
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