Despite the considerable improvement in the legal framework, deferred compensation has not really taken off in Germany. Small and medium-sized enterprises in particular lag behind. This is revealed by the “Kundenkompass Betriebliche Altersversorgung" (Customer Guide to Company Pension Schemes) published by Delta Lloyd Deutschland AG and the FAZ Institute.
Despite the considerable improvement in the legal framework, deferred compensation has not really taken off in Germany. Small and medium-sized enterprises in particular lag behind. Dedicated employers can convince their employees to provide for their retirement through the company pension scheme. However, only one in four CEO's does so and only one in two companies holds regular sessions to inform its staff of the possibilities of company pension schemes. This is revealed by the "Kundenkompass Betriebliche Altersversorgung" (Customer Guide to Company Pension Schemes) published by Delta Lloyd Deutschland AG and the FAZ Institute.
Take-up of company pension schemes is still low
Many employees in Germany recognise the need for additional pension provision: Eight out of 10 employees in small and medium-sized enterprises make additional retirement provision besides the state pension. However, so far just 47.2% of those surveyed take advantage of the tax breaks for company pension schemes and just seven percent of employees definitely plan to buy another pension product by 2011.
Employees consider that the quality of the products on offer has improved in the last five years. There has also been a significant improvement in the legal framework: In 2005 the Retirement Income Act began the transition to downstream taxation and at the end of last year the legislators decided that contributions to company pension schemes should remain exempt from social security contributions. This also improved portability, so that existing entitlements can be transferred in case of a change of employer.
Success stands or falls on the commitment of the employer
However, the success of deferred compensation stands or falls on the commitment of the employer to the company pension scheme. An active CEO and lucrative pension products will convince most employees. If the employer also makes a financial contribution, company pensions become even more attractive. Nevertheless only one in four employers actively offers a company pension scheme to its employees.
Employers do not supply enough information
The management of only one in two small and medium-sized enterprises offers staff information sessions and detailed consultations. At least one in three businesses provides regular information on the company pension scheme to its staff on an individual basis. Many managers and directors forget that company pension schemes are an important tool for attracting the urgently required specialist and management staff and binding them to the company in the long term.
Shortage of money and a false sense of security
Many employees who do not currently have any additional pension provision say that they lack the necessary money for deferred compensation. Higher energy and food prices are factors here, as is higher VAT. However, it is not just a lack of commitment from the CEO and scarce personal resources that prevent many employees from saving for their retirement, but also a false sense of security. One in three employees, who currently makes no additional provision, considers the state pension to be sufficient. The appeals of the government and consumer associations to make additional provision for retirement have obviously not reached these employees. On the other hand, almost one in four of those making active provision does not believe that their existing additional provision will be sufficient to ensure a reasonable standard of living when they retire.
Tax benefits not taken up
Only a few employees, who engage in deferred compensation, take advantage of the full tax allowance. Just one in two employees engaging in deferred compensation is aware of the tax allowance of €4,344 for direct insurance, pension schemes or funds. Overall, just three out of ten employees who engage in deferred compensation and are aware of the tax allowance take full advantage of this. A further third of those surveyed said that they took advantage of most of the allowance. One in five employees even claims less than 50% of the maximum allowance.
Employees in favour of company pension schemes being compulsory by law
Employees obviously feel guilty about making inadequate additional provision for their old age. There is no other explanation for the fact that one in two of those surveyed said that making provision through a company pension scheme should be a legal requirement. Behind this lies the conviction of many employees that the majority of the population will not make adequate additional provision for their own old age unless the government exerts some legal pressure on them.
Information on the survey:
For the "Kundenkompass Betriebliche Altersversorgung", 1,000 employees who pay social security contributions from small and medium-sized enterprises with 10 to 500 employees were interviewed about their planned provision for retirement in January and February this year. Those interviewed represent a cross-section of the corresponding section of the population in Germany. The survey was carried out by computer-aided telephone interviewing based on a structured questionnaire according to the Computer Aided Telephone Interviewing (CATI) method.
-ends-
Further information about:
Delta Lloyd Deutschland AG, Press and Public Relations, Martina Faßbender
Wittelsbacherstraße 1, 65189 Wiesbaden
Telephone: 0611 773 25 71
Fax: 0611 773 29 68
E-Mail: martina.fassbender@deltalloyd.de
Internet: www.deltalloyd.de
Notes to editors:
About Delta Lloyd
Delta Lloyd Germany is a full subsidiary of Delta Lloyd Group, Amsterdam, and therefore part of the British Aviva Group. The company offers a wide range of financial, investment and pensions products as well as expert advice on all financial matters. Apart from Delta Lloyd Leben and Hamburger Leben, a pension fund and a consultancy firm for company pension schemes, Delta Lloyd Group also includes a private bank, an investment trust, a property company and a property finance broker.