Strengthening occupational pension schemes: simpler and more attractive for greater participation

Demographic change is putting pension systems to the test. While the pay-as-you-go system of the first pillar and private pension provision in the third pillar are the focus of political debate, the second pillar of occupational pension provision is less in the spotlight. Yet with greater use of equities and thus higher return opportunities, it could become a key pillar. We have therefore examined occupational pension models in France and Germany and formulated recommendations for action to secure pension income.

"Occupational pensions need an update. Their potential remains largely untapped in Germany because they are too complicated and too expensive. Anyone who wants to help occupational pension schemes achieve a breakthrough cannot ignore non-guaranteed products that enable greater use of equities and thus higher returns. If the planned pension savings account is opened up to the second pillar, pension entitlements can be easily transferred when changing employers. This could be a turning point for occupational pension schemes. Together with the automatic inclusion of employees in a company pension scheme, provided they do not object, targeted tax incentives and a minimum equity quota of 60 per cent, as has proven successful with capital-forming benefits, this will result in an attractive system," explains Henriette Peucker, Chief Executive and Member of the Board of Deutsches Aktieninstitut.

In 2019, France created a well-coordinated system with the Plan d'épargne retraite, which is compatible with old contracts. This makes it possible to merge existing products and transfer them from one employer to the next. As a result, the number of contracts in occupational pension schemes has risen by 36 per cent. This is shown by the study ‘Pension provision in Germany and France: Recommendations for action for flexible, high-yield and comprehensive occupational pension schemes’, which the German Stock Institute presented today. The pay-as-you-go system, in which the contributions of the working population directly finance the incomes of the retired generations, as well as the considerable tax revenues that are additionally required to finance the pension funds, need to be supplemented by equity-oriented measures. Currently, the returns from equities, equity funds and ETFs, which in the past have generated an average of between 6 and 9 per cent per annum when invested in a broadly diversified, long-term and continuous manner, are not being utilised.

In November 2025, the EU Commission presented proposals to tighten the regulation of occupational pension schemes. ‘The stricter requirements for occupational pension funds contained in these proposals increase the costs of occupational pension schemes. This contradicts the goal of strengthening funded pension schemes across Europe,’ Peucker concluded.

Our recommendations in detail:

1. Simplify the product range:

In order to enable low-threshold access, especially for employees of small and medium-sized enterprises, the pension savings account planned as part of the reform of private pension provision should be opened up for occupational pension schemes as a simpler, more profitable, less expensive and transferable pension option.

2. Higher returns without guarantees:

In the case of equity investments, long-term, diversified and continuous investment serves as a safety mechanism. For a higher pension income, we therefore recommend non-guaranteed products in occupational pension schemes as well.

3. Increase attractiveness for low-income earners:

To make occupational pension schemes more attractive for low-income earners, we consider the introduction of a minimum subsidy in the form of a lump sum, as in France, to be sensible. It should amount to at least 2 per cent of the contribution assessment ceiling. We also recommend increasing tax incentives in Germany by at least doubling the tax-free contributions.

4. Strengthen capital-forming benefits (VL):

VLs are well established, but many contracts are increasingly falling out of the scope of state subsidies. We recommend abolishing income limits, tripling the employee savings allowance and making income from VLs tax-free.

5. Automatic inclusion with right of objection:

We propose the comprehensive inclusion of broad sections of the workforce in share-based pension schemes. To achieve this goal, we recommend automatic inclusion with the right of objection.

6. Minimum share quota as for VL:

The minimum share quota of 60 per cent has proven its worth in fund savings within the framework of VL. We therefore propose that the same quota be set when concluding a pension plan contract in the occupational pension scheme and that it be reduced within the framework of life cycle models upon retirement.