The lower house of the German parliament late last month approved a measure which would reform Germany's pension system and make it difficult for plan participants to invest in stock mutual funds. Under the measure, the size of state pensions would decline over the next 30 years, individual contributions to privately-funded pension plans would rise and the state would offer cash grants or tax incentives to those who join the private plans, said Dieter Braeuninger, senior economist at Deutsche Bank Research in Frankfurt.

However, the plan includes tough restrictions on private investment. Government subsidies and tax relief will be limited to pension plans that can guarantee participants will get back, at a minimum, the amount of the premiums they have paid. This provision appears to make difficult, but does not rule out, investments in stock mutual funds, said Braeuninger.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.