“Almost all” German companies have switched to using a defined contribution occupational pension scheme for employees, according to WTW.

Its German Occupational Pension Index 2024, which analysed over 200 companies in the country, found that 97 per cent make use of DC schemes and the majority of these use capital market-oriented interest models.

Insurance-based schemes make up the majority of these, at 58 per cent, as they remain the most popular with small- and medium-sized companies due to their efficient administration options, WTW said.

However, a fund-based model is now used by 21 per cent of companies (2021 - 16 per cent), whilst the prevalence of fixed-interest models continues to decline.

In most German companies (80 per cent), the contribution is calculated using a split contribution formula – usually with a split at the contribution assessment threshold of the statutory pension insurance (BBG).

This has the advantage that for high earners the missing benefit from the statutory pension insurance can be compensated. The median contribution rates are 3 per cent up to the BBG and 10 per cent above the BBG.

Although most companies rely on a contribution-based system, the contribution rate remains highly sector-dependent and fluctuates significantly.

"When calculating their total remuneration packages, companies need to take a close look at what is considered standard market practice for their industry," WTW senior director retirement, Dr Johannes Heiniz, said.

"For example, contribution rates in sectors such as pharmaceuticals and chemicals are traditionally relatively high, while other sectors, such as construction and retail, have comparatively low rates."

Furthermore, WTW’s report found that large companies tend to be the trendsetters when it comes to occupational pensions. Heiniz said that they tend to be “10 to 15 years ahead of the market”.

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