Around a million people in Germany receive their pensions from professional pension schemes, for example doctors, lawyers and engineers. Because the factories have to invest money in increasingly risky ways, they are now threatened with losses.

Doctors, lawyers, tax consultants, architects, engineers and some other professional groups do not have statutory pension insurance, but rather through pension funds. Their pension fund does not work according to the pay-as-you-go system, in which today’s contributors finance the pensions of today’s pensioners, but invests the money collected in order to generate better pensions with the returns. There are around 90 such organizations with around a million members in Germany. They manage assets of around 300 billion euros.

Traditionally, this money is invested in fixed-interest securities, such as bonds or Pfandbriefe. In the 2010s, however, this was not good business because interest rates plummeted due to the European Central Bank’s (ECB) low interest rate policy. So the pension funds had to redeploy. Instead of bonds, more and more money flowed into other asset classes with higher returns, such as stocks, direct corporate investments and real estate.

They, in turn, are now in crisis since interest rates have risen again. Commercial real estate in particular has suffered losses in value worldwide – also due to the trend towards home offices – and many companies are currently barely growing.

In order to maintain pension payments for the mostly high-earning professional groups, pension funds must generate a return of around four percent per year. Even in the 2010s, only three of the ten largest plants achieved this each year. Now things are getting even more difficult. The Berlin dentists’ pension fund, for example, had to write off around 45 million euros of its assets as early as 2022, which was around two percent of its total assets.

Losses or returns that are too low lead to factories getting into financial difficulties. These can only be compensated for in two ways: either the membership fees are increased to create additional income, or the pensions are reduced in order to save on expenses. Neither is likely to be well received by the members.

Yes, the plants are controlled by the supervisory authorities of the respective federal states in which they operate. The legal requirements and the statutes of the plants themselves restrict possible investments, but the leash is long. The primary focus of the guidelines is to protect members from a total loss of their contributions. For example, the factories have to diversify their investments and avoid securities that are too risky. In addition, the investments must always be liquid, i.e. they must be able to be sold at any time so that the pension fund can pay out the pensions. However, it is a matter of interpretation as to when an investment becomes too risky. According to Wirtschaftswoche, various pension funds have invested in daycare centers, forests, a mall in Taiwan, an office complex in Chile, hedge funds and loans with the risk of total loss in recent years, for example. Although economists criticize some of these investments, in the end it is difficult to draw an objective limit.

Every plant must prepare annual financial statements once a year in which the investments and their profitability are broken down. These business reports can be viewed in full, at least by members of the pension fund, usually via your pension fund’s website. The new pension payments are also communicated there based on the annual report.

If, based on the annual report, you are of the opinion that your pension fund is investing funds at too risky a level, there are initially internal complaint procedures where you can request a review of the investment strategy. It is better to find like-minded people and make your displeasure known at the next general meeting. If your pension fund’s investments violate legal requirements, you of course have legal recourse.

Unfortunately, leaving the pension fund in protest is not an option. The funds are compulsory insurance for the respective profession. Leaving is only permitted in a few exceptional cases, and dissatisfaction with the investment strategy is not one of them. The easiest thing would be to move to another federal state, which would then be covered by a different pension fund.

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