The Effects of Low Interest Rates on Corporate Pension Provisions in Germany
German Economic Institute (IW)
The zero interest rate policy of the European Central Bank is placing a huge burden on company pension schemes. As a result, companies are being forced to increase provisions for their direct pension obligations to their workforce. However, far from taking appropriate account of this additional expense, the state is taxing fictitious profits resulting in a tax burden of some 20 to 25 billion euros. This is depriving companies of liquidity which could otherwise be invested. A lowering of the imputed interest rate for tax purposes would counteract this effect.
Abolition of the Additional Earnings Limit
The ageing population in Germany is increasing pressure on the social insurance systems and will (in the future) exacerbate the shortage of skilled labour.
IW
The Reform of Old-Age Pension Systems in Germany
Concerns about the risk of poverty in old age have prompted a multitude of reform proposals, most of which aim to introduce additional redistributive elements into Germany’s statutory pension scheme.
IW