Occupational pensions
Occupational pensions provide an opportunity to supplement public pensions from
private sources at relatively low cost and are the most common form of private pensions in
Germany.
Workers have the legal right to join an occupational pension plan, but need to
take an active decision to do so. Only half of workers are aware of this legal right (Lamla
and Coppola, 2013). The government plans to promote occupational pensions through the
legal extension of collective agreements among social partners.
A number of countries have chosen a broader approach, by introducing automatic enrolment with an option to
opt out. Insights from behavioural economics and evidence from Italy, New Zealand and
the United Kingdom suggest that automatic enrolment improves coverage (OECD, 2014f).
Such automatic enrolment could be complemented with the introduction of a fall-back
pension fund, which offers a low-cost investment instrument to those firms and
individuals who do not wish to make their own arrangements to save for complementary
private pensions.
Occupational pension plans may not reduce old-age poverty risks
substantially for workers with long interruptions in their employment careers.
As recommended in the 2014 Survey, a cost-effective way of limiting future old-age poverty
risks with poor employment careers while preserving incentives to work would be to phase
out means-tested subsistence benefits more slowly as pension entitlements rise. Moreover,
compulsory pension coverage should be extended to the self-employed.
EU Forecast
euf:ba18a:89/nws-01