GERMANY - German lifetime working account (lebensarbeitszeitkonto) schemes will strongly accelerate the pace of the transition from defined benefit (DB) to defined contribution (DC) schemes, much advocated by German companies in a country largely dominated by DB schemes, asset managers have claimed.
Speaking to Global Pensions, Peter Schwicht, managing director, JPMorgan Asset Management in Frankfurt, said: "Not only are corporates thinking about moving to lifetime working accounts, but also the trade unions themselves want additional models because the recently introduced retirement rules in Germany are pushing employees to look for alternative schemes to be able to retire before they are 67 years old."
These schemes, introduced in Germany in 1999, can be invested into a fund or a member's individual account and provide employees with greater flexibility. Further, they are not subject to the investment restrictions applied to most pension funds in Germany.
While employees favour schemes allowing them to effectively retire before reaching the age of 67, German companies are looking for ways to reduce the risk associated with pension liabilities on their balance sheets.
Robert Schlichting, head of institutional business, Schroder Investment Management GmbH, said: "We believe they represent a win-win situation for employees and corporates.
"If efficient solutions are worked out from a tax, legal and investment perspective and are tailored made for companies, these plans could reinforce a shift towards DC kind of schemes."
However, Anita Horstmann, from the investment division of Nestlé Pensionkasse VVAG, highlighted the differences between the two kinds of schemes. She said: "I do not agree lifetime working accounts will be the catalyst for a transition to DC type of schemes, as they are just two different things.
"Pension benefits are mandatory, while lifetime working accounts are voluntary and the contributions are not homogeneous. I believe the goals of the two kinds of schemes are very different."
Despite improvements in investment manager attitudes towards responsible investment, research reveals there is a way to go before the majority deliver meaningful action. Victoria Ticha explores why
The Co-operative Bank is set to continue de-risking pension schemes after it mitigated further losses by switching from the retail prices index (RPI) to the consumer prices index (CPI).
A model aimed at reducing climate change-related financial risk exposure from corporate credit assets has been launched by Insight Investment.
Universities Superannuation Scheme (USS) members should be responsible for most of the cost of increased contributions if the scheme's defined benefit (DB) section remains open to accrual, Pensions Buzz respondents say.