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Pensions

Germany Plans Pension Reform, Establishment of 200B-Euro Fund

Draft legislation would increase pension contributions amidst an aging population.
By Matt Toledo



German legislators have introduced draft legislation to reform the country’s pension system to shore up the system as the country’s population ages.

The draft bill, translated as the Pension Level Stabilization and General Capitalization Act, was published on March 5, with the goal of maintaining the state pension, a similar system to Social Security, which all German workers pay into and receive retirement benefits from.

The legislation aims to keep Germany’s statutory pension level, or Rentenniveau, at 48%, which is the pension benefit as a percentage of the average wage in Germany. However, if left unchanged, expected demographic changes would force the pension level to be decreased, resulting in current and future generations of retirees receiving less retirement income. The pension level has declined from around 53% in 2000, according to German labor union IG Metall.

Additionally, the draft bill proposes the creation of a foundation called “generational capital” that would invest in equities and make contributions to the country’s pension system starting in the mid 2030s to maintain the pension level at 48%. The fund would be initially financed by a 12-billion-euro loan from the German government, starting in the 2024 budget year. The fund would be expected to make a 3% return on this loan.

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“The aim of the law is to keep the statutory pension stable as a mainstay of old-age security in the long term through a permanent pension level of 48% and to be financed with generational capital in view of the development of expenditure and to ensure that the statutory pension insurance continues to remain reliable for younger generations,” states a translated description of the legislation. 

By 2036, the generational capital fund would be expected to have more than 200 billion euros in managed assets, which would be sufficient for the fund to use its net income to stabilize the pension contribution rate, with the draft legislation planning for 10 billion euros of pension contributions to be made from the fund annually, starting in 2026.

The fund is expected to primarily invest in global equities, with the legislation calling for a “return-oriented and globally diversified investment strategy.” Assets in the fund would be managed by the foundation. 

The proposed system is not without criticism.

“The financial markets are not a solid basis for statuary pensions,” IG Metall stated in a translated statement. “They sway too much. The pay-as-you-go system, on the other hand, has proven to be stable and extremely flexible for many decades.”

The legislation is planned to be passed before the summer, according to German Finance Minister Christian Lindner and Labor Minister Hubertus Heil, who presented the plan at a conference on Tuesday.

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Home > News > Regulation > SEC Finalizes Amendments to Require Greater Execution Quality Disclosure
Regulation

SEC Finalizes Amendments to Require Greater Execution Quality Disclosure

Updates to the rule on trade execution received a rare 5-0 vote.
By Paul Mulholland



The Securities and Exchange Commission finalized on Wednesday amendments to Rule 605 of Regulation NMS by a unanimous 5 to 0 vote. The revised rule will require more broker/dealers to disclose quality-of-trade-execution reports to investors and to use more data to measure the quality of execution.

Broker/dealers with at least 100 customer accounts will now be required to disclose reports on their executions of stock trades. The reports must now cover orders outside of business orders and certain types of orders with stop prices. When disclosing time-to-execute information, broker/dealers must use time increments of milliseconds or smaller and must include more information on average price spreads and price improvement.

Lastly, covered broker/dealers are required to publish a summary report of their data on a monthly basis.

SEC Chairman Gary Gensler argued at Wednesday’s open hearing that the rule will “foster more competition” by improving transparency and comparability. Commissioner Hester Peirce said the rule would provide a “clearer picture of execution quality” and will have positive effects for institutional and retail traders. She added that the summary reports will be helpful for the financial press, which will also help inform the public.

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This rule was initially proposed in December 2022, along with three other proposals that are still pending. When regarded collectively, they are known as the market structure proposals. The other proposals included a best-execution standard; mandatory auctions for retail orders; and a reduction in pricing increments to sub-penny tick sizes for certain stocks.

The finalized amendments were by far the most popular within the industry of the market structure proposals, and many recommended that it come first, because it would provide additional data which would help clarify if the other three proposals would be useful. The proposal on price increments received mostly supportive feedback, while the other two were broadly opposed by industry.

The rule becomes effective 60 days after being entered into the Federal Register, and the compliance date will be 18 months after that—probably near the end of 2026.

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