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Low-interest phase reaches company pension schemes – Pension funds to be granted more autonomy

Low-interest phase reaches company pension schemes – Pension funds to be granted more autonomy

Frankfurt/Main, November 18, 2015 – The Bundestag (Lower House of German parliament) has recognized that the low-interest phase has also reached company pension schemes. Following a petition by the coalition fraction, it was decided that during the ongoing low-interest phase pension funds shall receive more autonomy in deciding on investment options to receive higher returns on the market.  This preposition shall be implemented within a short period of time as the proposal was made in association with the application of Directive 2014/50/EU in German national law.

“The new regulation allows pension funds to carry out less restrictive and more flexible capital investments, which is suitable to the low interest environment and increases the attractiveness of  company pension funds. Another positive development is the fact that actuarial interest rates for life insurers will not be decreased further. However, to maintain the overall attractiveness of company pension funds, it is essential to also allow flexible capital investment opportunities with lower guarantees for other implementation options as well,” said Matthias Edelmann, Benefits Expert of the strategic HR consulting firm Lurse.

Unchanged commercial and tax legislation?

In the short term, there will be no changes to the determination and height of interest rates in commercial and tax legislation. However, a decrease of the interest rate under fiscal law is one of the most urgent measures to be tackled by politicians. “This is because the low-interest phase will grow more acute, creating tremendous strain on companies if they have to continue to evaluate pension reserves at an interest rate of 6 percent,” emphasized Matthias Edelmann.

Since 2008 and due to the fiscal law alone, medium-sized businesses already paid more than 500 million euro in taxes on profits they never made, the Association of German Chambers of Industry and Commerce recently informed Leiter-bAV.de.