Germany's bAV Schemes Adopt One-Year Risk Mitigation Plans for Better Income Protection
A new trend is emerging in occupational pension schemes (bAV) in Germany, with a growing number of companies adopting one-year risk mitigation plans. This shift aims to better protect employees' incomes in case of death or disability. Funk Vorsorge, a consulting firm, has been advising employers on suitable income protection models to address these risks.
Traditionally, death and disability benefits in bAV schemes were often inadequate, failing to cover sufficient income losses in case of a claim. However, this is changing. Nine out of ten one-year risk mitigation plans now cover the entire workforce, with higher salary levels being the most common beneficiaries of these plans.
These plans, which began as pilot projects in November 2023, are being phased in across various countries. The trend is towards decoupling risk benefits from pension benefits, allowing for more targeted coverage. More than a quarter of companies surveyed already use independent risk mitigation plans, with eight out of ten based on collective biometric insurance.
Funk Vorsorge offers consulting services to help employers navigate these changes. The firm reports that a typical death benefit promise is twice the annual salary, with disability benefits covering around 40% of the salary.
The shift towards one-year risk mitigation plans in bAV schemes is a significant development in employee benefits. These plans, phased in since late 2023, aim to better protect employees' incomes in case of death or disability. Consulting firms like Funk Vorsorge are playing a crucial role in helping employers adapt to these changes and implement suitable income protection models.
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