Pensionfonds Reform Introduced in Germany

April 9, 2001 (PLANSPONSOR.COM) - New pension legislation, creating a new type of occupational pension plan 'pensionsfonds" and amending current plans, has been introduced in Germany.

The proposed legislation, to be implemented in 2008, would allow participants to contribute up to 4% of their salary, which would be tax-exempt.

The funds must be run by a German management company and may only include:

  • mutual funds,
  • bank products,
  • and insurance products.

In addition, by proposing a move from quantitative investment rules to qualitative ones, the new legislation aims to make the rules imposed on pension plans, more flexible. However, the proposed legislation does provide details these rules

The legislation also requires plans to guarantee capital upon retirement and to provide for longevity risk by either paying an annuity upon retirement or a lump sum that must be used to purchase an annuity.