A good day for pensions: Bundestag paves the way for equity-based supplementary pensions

The German Bundestag passes the Pension Reform Act today. This is an important step that will bring tangible benefits to people in Germany from 2027 onwards. In future, the Pension Savings Account will enable people from across society to build up a tax-advantaged, equity-based supplementary pension, thereby creating a financial cushion for their retirement. The first step towards reforming the pension system has been taken; further steps remain sensible.

“Today is a good day for people in Germany, because after years of hesitation, private pension provision has finally become a reality. The Pension Savings Account harnesses the full potential of shares, without any guarantee obligation or fixed annuity payments. This now enables everyone who wishes to make private provisions for old age to invest in shares, equity funds or ETFs on a long-term, broad and continuous basis. I am particularly pleased that the coalition has also taken the self-employed into account and increased support for low-income earners,” explains Henriette Peucker, Chief Executive and Member of the Board of Deutsches Aktieninstitut.

A key element of the law is the simple standard account, which is designed to make it easier for people with little financial experience in particular to get started with private pension provision. The provision of the standard custody account by a public body is a first in pension provision in Germany. “It is crucial that this state-run scheme is not given preferential treatment in its implementation. For competition to work effectively, state and private schemes must meet the same requirements. There must be no preference for the state-run solution, let alone an obligation,” says Peucker.

In its studies, Deutsches Aktieninstitut regularly analyses successful pension systems worldwide and derives recommendations for action in Germany. This highlights the potential of a share-based approach across all pillars of pension provision.

“The Pension Security Commission appointed by the Federal Government has a great opportunity to rethink pension provision in Germany and place it on a stable long-term footing. The Pension Savings Account meets all the requirements to be used in the occupational pension schemes of companies that wish to do so. For the legislator, this is a technical detail, but one that can open the door to a profitable and straightforward pension scheme, particularly for employees in small and medium-sized enterprises. The Pension Savings Account is also the right instrument within the state pension scheme to incorporate a supplementary equity-oriented component. If this first step is followed by further measures, people in Germany can look forward to more prosperous times. The SPD’s plans to impose higher taxes on income from share investments and other capital gains, however, are counterproductive,” emphasises Peucker.