CFA Society Germany, the association of investment professionals, has proposed the merger between the country’s occupational and private pension systems under a format based on models in place in Sweden and Canada to cut administrative and sales costs that would lead to an increase in the level of pensions.

The models would cater for two different market segments, one including savers opting for a standardised, state-run pension product, and another for savers who demand control over investments, the association said in a paper on the reform of state-subsidised pensions in Germany.

The CFA mentioned the ITP/Collectum model, the system for private sector employees in Sweden, as a central, state-run platform for standardised products that could be offered in Germany by Pensionskassen and life insurers.

The providers of pension products on the platform are picked through a tender process under the Swedish Platform Collectum model.

Pensionkassen and life insurers in Germany would compete through tenders to offer occupational and private pension products on the platform open to the public and operated as an institution under public law with the government responsible for it.

They would be responsible for asset allocation and investment management, reporting, payment of pension benefits, offering products for a lifelong annuity, and giving the option to change employer free of charge, according to the paper.

With the new system, administrative costs would fall for the third pillar Riester-Rente from 1.5% to 0.4% of the assets, and costs from 4% of total contributions when closing a contract, to a commission of 1% of contributions, and in turn the level of pensions would increase, the paper added.

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