Act to Reinforce Company Pensions – status quo and Lurse’s recommendation
At the latest aba (German Association for Occupational Pensions) forums for tax and labor law, Dr. Möhlenbrock of the Federal Ministry of Finance (BMF) has given a closer insight into the intentions of the German Federal Government regarding the Act to Reinforce Company Pensions. Not all proposals from the present expert reports will be implemented. The Federal Government places special emphasis on an affordable support of company pension schemes for low-wage earners. This support does not necessarily have to be bound to Riester products. Rather, consideration is given to transfer a certain part of the employer’s contribution into the company pension scheme via a simple, employee-comprehensible procedure. However, tax incentives would not be given for the expert’s envisaged version of a “Defined Ambition Plan” entirely without guarantees unless a sufficient benefit had turned out of this. In this context, the security aspect is a major tax criterion. Other subjects that are being discussed by the Federal Government are the present double insurance contribution and complexity of Riester occupational pension schemes as well as the offsetting of company pensions against basic incomes. The subsidies of § 3 (63) EStG (Income Tax Act) for insurance-based implementation options may be raised from currently 4 % of the assessment limit of the statutory pension insurance scheme plus 1,800 € to 8 % of this assessment limit – without additional 1,800 €. In June 2016, according to Mr. Flecken of the Federal Ministry of Labor and Social Affairs (BMAS), there will be a pension dialog which also aba, the German Employers’ Association (BDA) and labor unions will attend. The detailed discussion among the Federal Government will begin after the summer recess.
Lurse’s recommendation: The clearly indicated fiscal reservations concerning a “Defined Ambition Plan” turn out to be an impediment to urgently needed new solutions in occupational pension schemes. Given the guaranteed interest rate of 0.9 % which will apply from next year, Lurse is critical of ignoring the option of a target pension as described by the expert. As a consequence, opportunities in the capital market cannot be exploited. The special fund model provided by Lurse already now offers an alternative through a direct commitment which allows a yield-oriented design due to its flexibility.