Commerzbank, one of Germany's biggest banks, has announced that it is closing its company pension scheme, affecting some 24,000 employees. The troubled insurance company Gerling says it will soon follow the same course. These surprise moves come as the German government grapples with the necessity of reducing state pensions to cope with the demands imposed on the system by a rapidly aging population. Is this another signal that Germany's generous postwar pension arrangements are coming to an end?
Prague, 8 January 2004 (RFE/RL) -- German employees, long accustomed to comfortable salaries and generous retirement benefits, have taken a double knock this week.
The country's third-largest bank, the Frankfurt-based Commerzbank, announced that it will cease contributing to the company's own pension plan by January 2005.
Citing "difficult economic conditions," Commerzbank says it hopes to save millions of euros in costs. Spokeswoman Beate Schlosser said the cancellation of the voluntary pension scheme is only the latest of many cost-cutting steps taken in the last two years.
Commerzbank, like Germany in general, is going through a rough patch, which has seen the bank's profits melt into losses in the third quarter of last year. Analysts see the cost-cutting program as a means of making the company more attractive to any potential merger partners.
Senior staff members have been quoted as saying the bank has breached the social consensus between employer and employee that has been the rule for so long in Germany. However, spokeswoman Schlosser plays down any philosophical significance of the pensions closure.
"It is just a company economy measure," she says. "The step was taken purely on grounds of business economics. And anyway, in the last 10 or 15 years, the Commerzbank -- and perhaps other companies, too -- have reduced their participation in such voluntary schemes."
A second big German company, Gerling insurance, also announced this week that, in the face of operating losses, it is reducing its pension payments to employees.
In both cases, of course, the companies will pay out to employees the money already contributed by the companies to the retirement funds. And they will continue with their obligation to pay into the state pension funds for each employee.
Other companies are now thought likely to follow Commerzbank and Gerling.
The fact is, though, that company pensions are only the "icing on the cake" as far as German workers are concerned. That's because state pensions make up by far the greatest proportion of an employee's pension.
A German worker presently can look forward in retirement to a state pension of up to 70 percent of his or her last salary, provided he or she is employed for the full span of a working life estimated at 45 years -- generous by any standard in the world. The government of Chancellor Gerhard Schroeder is, however, undertaking urgent steps to reduce this to a maximum payment of 64 percent, in view of a coming massive wave of retirements.
That may still sound like a comfortable income. But analyst Stefanie Wahl of the Institute for Economy and Society in Bonn issues a caution.
"Most retirees do not have that 70 percent," she says. "That is an 'imaginary pensioner,' because [in reality] fewer and fewer people are insured for 45 years and draw an average salary. In fact, only 50 percent of the male workers and 10 percent of women workers [receive the maximum level]."
In reality, Wahl says, most people retire on less than the maximum, and so under the new, tighter system, they will receive correspondingly less. And she says the actions of companies like Commerzbank and Gerling are definitely the start of a new trend. She says companies themselves are changing -- and so, too, is the type of work they offer. Instead of consisting of steady staff positions, employment will in the future more likely consist of a job for the specific length of a project.
"Companies are drawing back. The individual must do more for himself, with less help from his employer. The state also is somewhat drawing back, because it can't finance everything anymore. That means the individual must do more forward planning, and accept more responsibility. That's the trend," Wahl said.
She says a hybrid scheme, called the Riester plan -- named after the government minister who originated it -- may offer a path forward. Under this plan, the individual finances his own pension, regardless of his company. And as long as the account fulfills certain conditions, the government will also contribute to it. In addition, the state pension would still exist, but at a reduced level.
As Wahl puts it, "We know we must change the mix between the [state-funded] 'pay-as-you-go' system and the capital-funded system. We are still too concentrated on the 'pay-as-you-go' and too strongly fixated on the state system. We need a better balance between private and state funding."
So far, fewer than 5 million workers participate in the Riester plan, mainly because of the bureaucratic complications involved in getting into it. But there are increasing calls from politicians of all orientations in Germany to have the process simplified so that many more citizens will join in.