*by Ralph C. Kiening (Bamberg), corporate consultant-bAV (www.betriebsrentenkasse.de) and Johannes Fiala (Munich), lawyer (www.fiala.de)
Old-age poverty preprogrammed? A recent study by the German Institute for Retirement Provision (DIA) reveals that the statutory pension is no longer sufficient. However, almost 60 percent of all households do not provide sufficiently for their old age. Almost one third of the population is even threatened with descent into old-age poverty, which means the need for social welfare. Little effect from reforms: The legislator labored accordingly for decades on a reform of the ?pension? Riester, Rürup and CO. did not ensure however still approximately for the fact that the situation improves. besides an intensive view into the work pension law would have brought more clearing-up, than the ?small pension savings of uncle Riester? However, the new promotion, indeed the renaissance of occupational pension provision (bAV), was ultimately an ‘unwanted pregnancy’ of the Riester pension. As a result of the 2001/2002 pension reform, occupational pension schemes experienced an unexpected boom. In spite of these considerable subsidy measures, however, only about 7% of eligible employees have made use of them to date. Hardly any implementation in the companies: Let us now ask the question why this might be. One reason may be the complexity of the subject of occupational pension schemes, the reluctance of some employers or the financial situation of the average citizen. But certainly also the complicated communication of the legislator. In addition the legislator met since 01.01.2005 with the Portabilitätsverpflichtung of the employer a regulation which can be hardly mastered technically. Who can blame employers for the fact that the average implementation rate in companies is only around 5%? Few experts on the market: However, we believe that a significant reason for the non-utilisation of this company subsidy can be found in the sales behaviour of the insurance industry: as soon as it was known that the occupational pension scheme would take such a step forward as part of the pension reform, the insurers rounded up their entire sales force and appointed anyone who was able to roughly identify the difference between a direct insurance and a pension commitment as a so-called “occupational pension specialist”.Similar to the sales behaviour after the opening of the borders, these ?specialists? now attacked the companies and their employees like locusts. Equipped with half-knowledge, the employers were now “advised”. Often the bosses of the companies were not clearly informed, in many cases they tried to train the boss himself as a specialist by confusing him with technical terms learned by heart. The legal obligation, however, made him agree to a staff meeting after all. The employees were also “trained” in lengthy staff meetings with technical details to the conclusion that occupational pension schemes were far too complicated and that it would be better to think about taking out the umpteenth life insurance policy again. Very to the joy of the life insurers and their representatives, who could be pleased by the omission of the tax-free disbursement in the age since 01.01.2005 about an unexpected commission blessing. Zillmerungshaftung: Imagine, they lock a savings contract in your house bank and pay in mtl. 200 euro. After 18 months you ask what the account balance of your savings contract is. You get the answer that there is no capital available. A case for the public prosecutor? Far from it! By conclusion commissions and costs this case is reality and legality in the insurance economy. In the end, it is the employer who pays for this, because the use of zillmerized tariffs, especially in the case of deferred compensation, represents a liability-based violation of the duty of care under labor law. Employer liability with insolvency risk: While this calculation may be common practice in private contracts, it is fatal in the context of occupational pension schemes. This is because the employer is fully liable for the converted remuneration of his employee. If the employee changes to another company before the coverage capital is reached, the employer is liable for money that is not there. Surprisingly, this fact is not presented to the employer by his insurance agent in the ?consultation meeting?. In most cases, the absolute necessity of documenting the employer’s duty to inform the employees with a written addendum to the employment contract is not discussed at all. In the worst case, the judge’s decision to make up for lost pay for the former employee can lead to insolvency. Solution approach of the operating pension fund: An innovative idea for the solution for the employer is the mechanism of its own ?operating pension fund? after the model of the industry, which does not let itself take the administration of the plants of your coworkers out of the hand. Here, cleverly calculated framework agreements and group tariffs are used for both employer and employee. The customer himself becomes the mediator! He now decides himself on the design of his bAV and still earns money with it. Less than the insurance agent, since sensibly calculated contracts contain fewer commissions, but enough to cover the costs of setting up and administering his “company pension fund”. One company known to the authors even made a six-figure profit from its company pension fund due to its size. In addition, external consultants also solved the problem of the portability obligation and ensured that no social security contributions would be due for the contributions of its employees beyond 2009. Thanks to this type of occupational pension solution, well over 60% of the workforce in this company have taken advantage of the employer’s offer and thus plugged a large part of their personal “pension hole”. This makes the idea of having your own company pension fund not only profitable but also a socio-political responsibility.
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About the author
PhD, MBA, MM
Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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