The company pension is intended to secure Germans' retirement provision alongside the statutory pension. But how can more companies be persuaded to offer a company pension? The cabinet is discussing a draft law today.
The deal is not quite finalized yet, but it is set to change the lives of his colleagues. A company pension. “A little light on the horizon.” That's what Sven Ebeling calls it. He sat at the table during the negotiations – for many, many months. Now he is “really happy” and also a little proud.
Ebeling knows the problems of his colleagues. He knows what it is like to have to get by on little money: He has been working at Düsseldorf Airport for more than 25 years. He started at the check-in, processing passengers, Student job. Later he worked in baggage handling. Jobs that keep an airport running and make vacation dreams come true, but are not well paid.
A company pension as an investment in the future
“You don't earn enough to be able to make a big private pension,” says Ebeling. “And the pension looks anything but rosy.” Many colleagues can only work part-time for family reasons. Then the prospects are: working all your life and possibly no longer being able to pay for your current rent when you retire.
Ebeling wanted to do something about it. That's one of the reasons why he fought for a company pension for a long time. Hopefully it will come into effect at the beginning of next year. His employer AHS will then pay into an investment fund for each employee in addition to their salary. “Some might prefer to have an extra day's holiday,” says Ebeling. Or a special payment. That is more understandable, you notice it straight away. “But in the end everyone thought the company pension was good because it is an investment in the future, for old age.”
Currently 54 percent of German employees with company pension
The Ministry of Social Affairs estimates that around 54 percent of employees in Germany who are subject to social insurance contributions currently have a company pension. “Nobody should have to worry about financial matters in old age,” says Federal Labor Minister Hubertus Heil (SPD). “The combination of statutory pension and company pension is the best way to achieve this.” To make it easier for small and medium-sized companies to introduce a company pension, the Federal Cabinet wants to introduce a draft law today.
This will make it easier for companies to participate in other existing company pension models. This will shorten the long and bureaucratic negotiation process and enable small companies to offer a simple and secure company pension. In addition, the state will contribute more to the company pensions of low-income employees if the employer offers a company pension: the income limit for the additional subsidy will be raised to 2,718 euros per month and made dynamic.
The hope is that more companies will find it attractive to offer a company pension – not least employers also benefit from tax relief if they offer a company pension. They get 30 cents back for every euro they pay in for their low-income employees.
The Netherlands as a model: Company pensions are widespread there
However, even in the traffic light coalition there are doubts: “Although the measures improve the conditions for existing company pensions, it remains questionable whether company pensions will become more widespread as a result,” says Anja Schulz, pension expert for the FDP parliamentary group. She certainly sees “considerable potential” for company pensions in Germany – especially in comparison to some European neighbours with company pension rates of more than 90 percent, such as the Netherlands. But further measures are needed “outside of collectively organised structures”.
This is aimed, among other things, at the so-called social partner model, which was implemented in 2017 by the then Minister of Labor Andrea Nahles. According to this, employers and employees can agree in collective agreements that the employer guarantees that it will pay certain contributions into a company pension. However, it does not have to guarantee a specific amount of the later pension. The employer is therefore no longer liable for the company pension and can therefore calculate the financial risk better. This is because it does not have to put money aside in the event that interest rates are low and later pensions are small.
FDP wants access to Social partnership model further summarize
The FDP believes that the idea of making a contribution commitment rather than guaranteeing a pension level is the right approach. However, the Liberals have long advocated opening up the social partnership model to non-union companies. This includes more than half of all small and medium-sized companies, which make up 99 percent of all companies in Germany.
According to the draft law, the next federal government will review in 2028 whether the company pension rate has increased. If that is not the case, then we must also think about compulsory company pensions, the draft states. Sven Ebeling from Düsseldorf thinks that this is the right way and that company pensions are the right way to combat poverty in old age: “Especially if you are not in a position to make private financial provisions yourself,” he says, “then it is all the more important that employers are also held accountable.”
