This guide walks through all the supporting processes to manage the pension during the accumulation phase.
Before offering a German pension account, you (or your certifying partner where not directly certified) are responsible for ensuring that the securities available in your pension offering comply with the eligibility rules set out in the Altersvorsorgeverträge-Zertifizierungsgesetz (AltZertG).
The rules differ between the Altersvorsorgedepot and the Standarddepot, and are summarised below.
The Altersvorsorgedepot supports a broad range of instruments. All eligible instruments must carry a risk class not exceeding 5 as shown in the Key Information Document (Basisinformationsblatt, KID) under the PRIIPs Regulation (EU) No 1286/2014.
The following instrument types are eligible:
- UCITS (OGAW) such as ETFs and mutual funds.
- Open-ended ELTIFs such as private equity or private credit funds.
- Euro-denominated bonds issued by the German federal government, Länder, equivalent public-law bodies, eurozone member states, the EU, Euratom, the European Investment Bank (EIB), or the European Financial Stability Facility (EFSF).
- Open-ended public AIFs such as real estate or infrastructure funds.
The Standarddepot has more prescriptive rules. It must be built around exactly two UCITS funds, selected according to the following risk classifications:
- Fund A: one UCITS fund such as an ETF or mutual fund, with a risk class of 1 to 2 (lower risk).
- Fund B: one UCITS fund such as an ETF or mutual fund, with a risk class of 3 to 5 (medium to higher risk).
End users may choose to invest in only one of the two funds if they prefer.
When selecting funds for the Standarddepot, there is a 1.0% effective cost (Effektivkosten) cap which is inclusive of all costs.
This includes your charges and all underlying fund costs, including the total expense ratio (TER), transaction costs, and any other fees or rebates, that reduce returns over the accumulation phase.
Only eligible instruments should be presented to end users when investing in the pension accounts. Upvest enforces eligibility at the point of order placement. Any order placed against an instrument that is not eligible for the German pension account will be blocked.
To ensure orders are not rejected, you should perform eligibility checks before adding instruments to your pension offering.
Your Upvest account manager can support you in reviewing your proposition.
Use the /pension_de/product_configurations endpoint to define the instruments for your offering. Refer to the Product information sheet section for full details.
Changing instruments requires the creation of a new product configuration. This is then reflected in the performance scenarios illustrated in the end user’s product information sheet.
When you intend to change instruments, align with your relationship manager on the process.
The following section explains the different ways the pension account can be funded. Each method has a specific process that must be followed to ensure the end user’s annual allowance is correctly updated.
All new contributions need to follow a consistent approach to ensure the allowance is updated correctly. This is different depending on your payment and settlement flow.
In post-trade settlement, the virtual cash concept is used to represent uninvested money in the pension account. As contributions are always cash and not order-based, we use this concept to track contributions into the pension.
- Virtual cash increase instruction - for contributions, this is always triggered by the client. When a request to increase the virtual cash balance is received, Upvest assigns the amount of the increase as a new contribution and reduces the available allowance by the same amount.
- Cash balance - the cash balance is updated with the cash increase and the funds can be used for the normal order flows.
- Other cash balance events - other events that can impact the cash balance include: proceeds from a sale, distributions, transfers in, and bonus payments. These have different processes, detailed below, which allows Upvest to distinguish between new contributions versus proceeds of a sale, for example.
- Rejected virtual cash increases - if the virtual cash balance exceeds the available allowance, Upvest rejects the increase request and the cash balance remains the same. We recommend that clients actively check the available allowance before increasing virtual cash or accepting money into their pooling account.
Credit funding is the flow by which end-users fund their account group by sending a SEPA Instant Credit Transfer to a dedicated bank account (vIBAN). When an end-user sends funds to it, the payment is attributed to the correct account group and Upvest assigns this as a new contribution.
A direct debit allows Upvest to collect funds from an end user's external account directly into their account group cash balance, using an existing SEPA Direct Debit mandate, and fund investment activity. Direct debits must always be tied to a savings plan or a single order and cannot be used for standalone account funding.
- Cash balance - the cash balance is updated once payment has been confirmed and the funds can be traded using the normal order flows.
- Other cash balance events - other events that can impact the cash balance include: proceeds from a sale, distributions, transfers in, and bonus payments. These have different processes, detailed below, which allows Upvest to distinguish between new contributions versus proceeds of a sale for example.
- Rejected payment - Upvest will always check the allowance before accepting the payment and reject any payments that would exceed the allowance.
All functionality available today in the trading and portfolio accounts can be applied allowing users to update their investments without withdrawing from the pension.
For distributions, we utilise the existing workflows to automatically reinvest the cash distribution into the pension fund. For more information, refer to the Reinvestment guide.