German Plan Sponsors Urged to Communicate Pension Benefits More Effectively
29 August 2012 (PLANSPONSOREurope.com) - German plan sponsors as well as Government need to do more to communicate the benefits of saving for a pension to arrest the trend of more Germans choosing to take on mini-jobs following retirement, Lex Hoogstad Vice President Global Compensation & Benefits at Elster Group has told PLANSPONSOR Europe.
This week German newspaper the Süddeutsche Zeitung published figures which reveal number of German pensioners working “mini-jobs” to supplement their income had increased by 60% since 2000. In 2000, 280,000 pensioners heldd the €400-a-month jobs, which are exempt from taxes and national insurance contributions. This figure has now risen to around 761,000.
Hoogstad told PLANSPONSOR Europe “I think in most pension schemes in Germany when there is a pension scheme in the company people do automatically join. There are however third pillar options for people to make additional pension savings which are sometimes topped up by the employer. There are arrangements for private pensions which people can take out and those do allow quite significant tax deductions so the limit to contribute to that is quite high.
“I don’t think it is a matter of auto-enrolment – I think it is a matter of communication and German employers are not very active there because pensions are not really a matter that is very much discussed in Germany like in the UK or US for example. Pension awareness is very low. It is only people that are over 45 or 50 that look around to get information and that is a late start.
“People are not only doing mini-jobs to earn more money but it is also a matter of people trying to continue to engage in society. There should be a government campaign to increase people’s pension awareness – only when you seek information actively can you find it. It is not an issue being discussed in Germany or the sustainability of the German state pension that people receive after they retire. The first pillar is really huge.
“The first pillar is shrinking and that is something the government has announced quietly a long time ago. Now people are probably seeing the effects. People are not thinking about what they are going to live off when they retire and that is quite scary. That is going to be a ticking time bomb.
“I think it is going to be quite common for people to continue working beyond the normal retirement age. The normal retirement age is already being increased to 67 and I think it will go further. I think more people will participate in part-time jobs in order to stay active and top up their income. They are also healthier than in the past so they are able to work longer and employers will need those people to continue work.”