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BeeHive  >  BeeLines  >  Germany leads the way in new pension schemes

Germany leads the way in new pension schemes

Well, Iím off in a few weeks time to chair a big European conference on pensions in Frankfurt. Iím looking forward to it partly because Frankfurtís a great place to go to, but also because the conference has about ninety speakers over its three days and, as chairman I get to listen to and hang around with some pretty knowledgeable people Euro-pension wise. You can expect to hear more from me over the coming months on European pensions. Iím pretty sure Iíll be buzzing on the subject on my return. Just as sure as I am that European developments will have the most profound effect on UK pensions in the long-term, and that weíd better understand whatís happening over there if we want to know whatís coming this way.

By way of background reading, though, and so I can amaze everyone at the bash with my in-depth knowledge of some of this stuff, Iíve been keeping tabs on all Euro-pensions issues, particularly those relating to Germany. Even if I hadnít, I doubt it would have been easy to miss some of the good news coming from there over the last few weeks.

You may recall that a few months ago I wrote about the new German pension reforms, and how important they were in the new unified country. Well, it looks as though their attempts at kick-starting their private pensions system have been a success. In a recent study conducted by the German ministry of health and social security, they report that occupational pension schemes are undergoing some kind of Ďrevivalí.

The German workforce has been reliant for such a long time on the pay-as-you-go state system of pension provision and in the longer-term this is seen as a real problem. The challenge in Germany, as elsewhere in Europe is how to get people making private savings and, particularly, how to encourage take-up of occupational pension schemes. If that sounds familiar, itís worth bearing in mind that our own pension problems are nowhere near as acute as those elsewhere in Europe, but essentially we all face the same pension realities. We either need to save more, or work longer. Or both.

In Germany, though, there is real optimism that the foundations of a revival in occupational pensions has been laid in the last few years. In April 2001 just 29% of private sector employees in Germany had access to an occupational scheme, whereas only two years later, that number has risen to 42%. It is interesting, I think, that the study shows a big increase in company pension scheme membership among women in the new German states. That and the fact that the labour-intensive hotel and restaurant sector of the economy has begun to see a genuine spread in pension coverage, all bodes well for the future.

In fact, the provision of occupational pension schemes in the hotel and restaurant sector has gone up from just 13% to 22% in just two years. More strikingly, in Germanyís manufacturing sector coverage has increased from 39% to 54%, and the luxury goods sector from 28% to 46%. So somethingís going right in German pensions, and itís refreshing to see that what is seen elsewhere in the world as a steady decline in pension coverage need not necessarily be inevitable.

It is true that the German pensions system is not directly comparable with ours in the UK, and there are distinct structural differences between our approach to occupational pension schemes, but things in Germany are moving in the right direction. And that is an achievement. Letís hope that the reforms to the UK system our government is kicking-off with the publication of the new Pensions Bill later this year will have a similar effect here to that of the introduction of the Pensionsfonds in Germany when they were launched in January 2002. An increase in company pension scheme coverage would be nice.

Steve Bee
8 September 2003

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