The social partner model with two collective agreements in the private banking sector

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Back in 2018, the legislator implemented the pure defined contribution commitment and the social partner models. Now the private banking sector is now following suit.

Uniper SE was the first to implement it, and the chemical industry is also implementing the pure defined contribution commitment.

The cornerstone for this is the collective agreement between the Employers’ Association of the Private Banking Industry (Arbeitgeberverband des privaten Bankgewerbes e.V. – AGV Banken) and the trade unions Vereinte Dienstleistungsgewerkschaft (ver.di) and Deutscher Bankenangestellten Verband (DBV) of 23 November 2023.

This is now being followed by the first collective agreement introducing the pure defined contribution commitment in a company in the private banking industry. Deutsche Bank is introducing the pure defined contribution commitment at its subsidiary, Postbank, following an agreement with the two trade unions.

According to press reports, the approximately 4,000 employees of the subsidiaries of the former Postbank Group will receive a pure defined contribution commitment. The pension provider is BVV Pensionsfonds des Bankgewerbes AG, which operates the pure defined contribution commitment under the name BVV.MAXRENTE.

 

Nature and background of the pure defined contribution commitment

With the German Occupational Pensions Reinforcement Act (Betriebsrentenstärkungsgesetz – BRSG), the legislator has created the possibility for employers to provide company pension schemes in the form of a “pure defined contribution plan” or in the form of a “pay and forget system,” to promote the spread of company pension schemes. Section 1 (2) no. 2 a of the Act to improve the company pension scheme (Gesetz zur Verbesserung der betrieblichen Altersversorgung – BetrAVG) regulates that a company pension scheme also exists if:

”...the employer is obliged by collective agreement or on the basis of a collective agreement in a company or service agreement to pay contributions to a pension fund, [...] to finance company pension benefits; the employer's obligations under paragraph 1 sentence 3, Section 1 a paragraph 4 sentence 2, Sections 1 b to 6 and 16 and the insolvency insurance obligation under Section 4 do not apply (pure contribution commitment).”

This means that the employer’s obligation is limited to merely paying contributions. In contrast to all other “conservative” forms of commitment previously recognised by law, the employer is no longer responsible for the promised benefit resulting from the contributions.

As guaranteed benefits are generally expensive and investment concepts based on guarantees are also not high yielding, both employers and employees benefit from this new form of commitment. In line with the wording of the law, the legislator has made the introduction and implementation of the pure defined contribution commitment the responsibility of the parties to the collective agreement. Consequently, the legislator stipulates in Section 21 (1) BetrAVG that the social partners must participate in implementing and managing the pension scheme.

The obligation to provide insolvency insurance and therefore the employer’s contribution to the Pensions-Sicherungs-Verein Versicherungsverein auf Gegenseitigkeit (PSVaG) no longer applies. To cover investment risks, the legislator requires the parties to the collective agreement to agree on a security contribution to be paid by the employer.

The pure defined contribution commitment is a modern “DC commitment” that can be planned by the employer and offers employees the prospect of a high-yield company pension scheme.

 

Key data on the pure defined contribution commitment in the private banking sector

According to the principles negotiated by the social partners in the private banking sector, the pure defined contribution scheme is to be introduced as a supplementary company pension scheme.

This new form of commitment is open to employers and employees who are bound by collective agreements and those who aren’t. But there are different contribution rates for employers not bound by collective agreements, which also increase gradually over the first four years. After four years, the maximum employer contribution for employers covered by collective agreements is 2.25% of the “gross monthly salary” and 1.65% for employers not covered by collective agreements.

If the “opportunity-oriented” product variant is selected, the maximum employer contribution is 0.15% lower in each case, but the employer has to pay a security contribution of the same amount. The collective agreement also provides for an employee contribution of at least 1%, which can be cancelled at most for low incomes through a company regulation. The social partners are involved in the implementation and management of the scheme via a social partner advisory board with equal representation.

 

An important milestone for the pure defined contribution commitment

After a long wait until the first two social partner models were finally introduced at Uniper SE and in the chemical industry in 2022, the social partner model of the private banking industry is now another important milestone for the pure defined contribution commitment and the company pension scheme in Germany.

Failure to implement this new form of commitment is a threat to its success and certainly also a threat to the acceptance of company pension schemes in total. So it’s even more welcome that the private banking sector is now also among those in favour of this new form of company pension scheme. The banking industry should also be predestined to offer a company pension scheme that doesn’t require guarantees and brings a higher yield.