The German government is proposing a reform to allow certain types of occupational pension funds to invest up to 5% of their assets in infrastructure.
The draft legislation jointly presented by the Federal Ministry of Labour and Social Affairs (BAMS) and the Federal Ministry of Finance (BMF), could allow Pensionskassen to allocate to both infrastructure equity and debt.
At the end of 2023, the financial regulator BaFin had 122 Pensionskassen under supervision with managed assets worth around €206bn in total.
If approved, the law will allow investments in projects for the provision, expansion, operation or maintenance of infrastructure assets considered of public interest, according to the draft bill.
There is currently no specific allocation for infrastructure investments within Pensionskassen portfolios. Instead, infrastructure falls under a broader category of alternative investments within the existing 35% risk-capital quota.
According to the bill, the risk capital investment quota would increase with the reform from 35% to 40% of the plan’s assets, to give room to pension funds to potentially expand investments.
As previously reported, the German alternative investment associations BAI, IDI – Initiative deutsche Infrastruktur – the occupational pension association Aba, and the Arbeitsgemeinschaft berufsständischer Versorgungseinrichtungen, the association representing the interests of first-pillar pension schemes Versorgungswerke, have pushed for the introduction of a separate quota for investments in infrastructure.
The proposed reform foresees a more flexible funding requirement for Pensionskassen. This would allow them to experience temporary periods of underfunding, facilitating an increase in their capital investments, according to the draft bill.
The reform follows a similar initiative in the state of North Rhine-Westphalia where pension schemes have the option to apply for a separate allocation of up to 5% of their assets towards infrastructure investments, subject to approval by the Ministry of Finance’s supervisory authority.
To read the latest IPE Real Assets magazine click here.