Recently, the first so-called social partner model (“Sozialpartnermodell”) was presented in Germany. The model was initiated by a cooperation of two large insurance companies and was realised with the involvement of a large German trade union.
Social partner models have their origins in a major reform of occupational pension law in 2018. They enable – for the first time in Germany – the granting of so-called pure defined contribution plans. Under such plans – which have been common practice abroad for a long time – the employer’s liability is limited to the mere payment of the pension contribution to an involved pension provider. This pension provider is then liable for the later benefits. Such plans require a collective agreement as a basis, i.e. an agreement involving social partners such as trade unions. The further requirements are set out in the Occupational Pensions Act (Betriebsrentengesetz).
The big advantage of such models for employers is that they provide absolute cost certainty. For the participating employers, the great advantage is that the contributions paid in can be invested more freely on the capital market than under the pension models that have been standard up to now, and thus a (significantly) higher return on investments can be achieved.
The model will be launched following mandatory approval by the Federal Financial Supervisory Authority (BaFin) and will cover up to 11,000 employees on the basis of a so-called in-house collective agreement. It is expected that the first insurance contracts can be concluded from 1 July 2021.
The introduction of social partner models has long been desired by many and is very much to be welcomed. It offers great advantages for both employers and employees and can contribute significantly to making occupational pensions in Germany more attractive again. It can be assumed that further social partner models will be established in the future.