With the introduction of the „ZielrenteChemie“ in the chemical industry, the social partner model (SPM) has reached another milestone in Germany. This form of company pension scheme has been specially developed for companies bound by collective agreements and offers an alternative to previous company pension schemes. In the chemical industry, there is also a chemical pension fund. On the other hand, IG Metall has already explicitly spoken out against the SPM in 2023.

The SPM was introduced in 2018 as part of the Company Pension Reinforcement Act. It differs from conventional occupational pension schemes in that it does not offer a pension guarantee. Instead, it is based on a so-called pure contribution commitment. This means that the employer is only obliged to make a contribution, but is not liable for the future pension amount. The model is designed to offer higher potential returns, as the contributions are invested in high-yielding but volatile investments.

One of the fundamental features of the SPM is the close cooperation between employer and employee representatives, the social partners. A joint investment strategy is developed that divides the risk between employers and employees. Additional security contributions can be agreed in order to minimise the risks of market fluctuations.

The most recent example of the implementation of the SPM is the ZielrenteChemie, which is organised by the Höchster Pensionskasse on the basis of the collective agreement in cooperation with Fidelity International. This variant offers companies in the chemical and pharmaceutical industry the opportunity to offer their employees a new type of pension scheme. The collective labour agreement is decisive for the structure of the SPM. Key parameters are defined on the basis of this agreement, for example a fluctuation corridor of 100 to 125%. The range refers to the capital cover ratio, i.e. collective assets in relation to the cash value of all pension payments.

The special feature of the target pension scheme is that contributions are invested in individual accounts during the savings phase and in collective pension pots during the pension phase. This collective management in the second phase is said to minimise the risk of pension cuts. A key element is the safety buffer, into which the employer pays 5% of the contributions. This buffer was particularly important to the trade unions and serves as a hedge in the event of strong market fluctuations.

Another advantage of the target pension scheme is the ability to organise the capital investment flexibly. The strategy provides for broad diversification across different countries, sectors and asset classes. Unlike many pension savings models, it does not take a lifestyle approach, but instead opts for a consistent investment strategy. This is a decision made between the pension fund and Fidelity.

According to calculations by Fidelity International, the expected return is around 4 per cent per year. This means that significantly higher starting pensions are possible compared to a classic occupational pension model with a guaranteed interest rate of 0.25 per cent. In a simulation, Fidelity arrives at a starting pension of 493 euros per month with the target pension for chemicals compared to 267 euros with a guaranteed model.

The first sector-specific SPM in the chemical industry was introduced in autumn 2022: the Chemical Pension Fund. In cooperation with the R+V Insurance Group and in close coordination with the German Federal Financial Supervisory Authority (BaFin), this model also relies on a capital market-oriented investment strategy.

This model also aims to generate stable long-term returns through a higher equity allocation. One difference between the two chemistry models lies in their implementation. In one case, it runs via a pension fund, in the other via a pension fund.

While the SPM has been successful in the chemical industry, the situation is less rosy in other sectors. One prominent example is IG Metall's planned SPM, which officially failed in 2023.

IG Metall rejected the model at its trade union conference. The union's main criticism was that the model would allow employers to shirk their responsibilities, as they would only make contributions but would not have to guarantee pensions. This contradicts the principles of IG Metall, which is in favour of reliable pension provision. It believes that this is only fulfilled by the statutory pension.

This failure illustrates the difficulties associated with the SPM introduced in 2018. In particular, the lack of a pension guarantee and the associated uncertainty for employees are points that make many trade unions and employees sceptical.

Compared to traditional company pension schemes, the SPM offers some advantages, but also challenges. In the case of indirect occupational pension schemes, the employer is usually subject to secondary liability, whereby the employer is liable for the promised benefits if the external pension provider fails to pay.

The social partner model, on the other hand, favours flexibility and higher potential returns. This generally leads to significantly higher initial pensions, but also harbours the risk of pension reductions in the event of negative market developments. The advantage for companies is that they are not liable for the pension amount, which creates financial planning security. The model is therefore particularly attractive for sectors with strong social partners and high collective bargaining coverage.

The reform of the Occupational Pensions Reinforcement Act II, which has now been launched, has far-reaching consequences for the social partner model. The aim of the reform is to promote the spread of occupational pension schemes, in particular the SPM, and to make them accessible to companies that are not bound by collective agreements. The hope in Berlin is that this could lead to the SPM becoming more widely established in the German economy.

A major innovation of the reform is the extension of the low-income subsidy. The income limit for the subsidy amount will be dynamised so that employees with low incomes can also benefit from a company pension scheme. In addition, pension funds are to be given more room for manoeuvre in their capital investments in order to achieve higher returns.

For the SPM, the reform means that it can be designed more flexibly. For example, companies that are not bound by collective agreements will also be able to join an existing SPM. This could make the model more attractive for small and medium-sized companies.

The social partner model has the potential to revolutionise company pension schemes, according to hopes in politics and business. The first steps have been taken with the „ZielrenteChemie“ and the „Chemiepensionsfonds“. The reform of the Occupational Pensions Reinforcement Act could provide the impetus to establish the model more broadly. However, the social partners' model is not a silver bullet.