More shares in your pension plan: making the most of your pension portfolio across all pillars

On the occasion of today’s handover of the Pension Security Commission’s report to the Federal Government, the President of Deutsches Aktieninstitut, Melanie Kreis, and the Chief Executive and Member of the Board of Deutsches Aktieninstitut, Henriette Peucker, stated:

“The Pension Security Commission’s proposals represent an important step towards ensuring the long-term sustainability of the state pension. In particular, I welcome the planned use of shares in pension provision. The introduction of a mandatory funded component within the statutory pension scheme follows successful international models. This will finally enable people in Germany to benefit from the capital market through their statutory pension, whilst at the same time strengthening the investor base for companies,” explains Melanie Kreis, President of Deutsches Aktieninstitut.

“In view of demographic trends, an adequate pension level cannot be achieved without an equity component in all three pillars of retirement provision. The Pension Security Commission’s proposals for a funded component in the statutory pension scheme should be implemented swiftly and consistently,”says Henriette Peucker,Chief Executive and Member of the Board of Deutsches Aktieninstitut. “For successful implementation, it is crucial that there are no guarantees and no annuitisation, so that the returns are used directly to increase retirement income.”

Deutsches Aktieninstitut also advocates for competition amongst providers during implementation. In Sweden, for example, around half of the funds are invested in the state-managed AP7 Såfa. Alternatively, people have the option of putting together their own pension provision from around 400 privately offered funds.

Finally, the Commission recommends that the social partners develop concrete measures to promote occupational pension schemes. The social partner model introduced in 2018 has not contributed to this. The right lessons must be learnt from this failure. To achieve significantly higher occupational pensions, it is necessary for all employers – independently of the social partners – to be able to switch their occupational pension schemes to a guarantee-free, pure defined-contribution scheme.

Using a pension account for equity investments across all three pillars of pension provision

The legislator should make it possible to use the private pension account for funded contributions to the statutory pension scheme and occupational pension schemes as well.

“The pension reform will be successful if all equity investments from all pillars of the pension system are held in a single account. This makes things clearer for people, is simple and unbureaucratic, and also guarantees portability within occupational pension schemes,” Peucker concludes.