AUSTRIA – Companies listed in the Austrian stock exchange index ATX suffered major actuarial losses last year after adjusting the discount rate for their pension liabilities, Austrian actuarial consultancy arithmetica found in its latest report on company pension obligations.
The defined benefit obligation of the 38 companies in the ATX rose from €6.3bn to almost €7bn between 2011 and 2012 despite two companies having been taken out of the index during that period.
Christoph Krischanitz, managing director at arithmetica, noted this was down to an adjustment of the interest rate in the face of a continued low interest rate environment.
On average the companies lowered the discount rate by 1.14% but Krischanitz stressed there was “a large spread” between companies especially in the industrial sector.
“Some are still using a discount rate of 6.75% and some only 2%”, the actuary noted.
In the previous year the highest rate used had been 7.5% and the lowest 4.5%.
This adjustment generated actuarial losses of €529m for the companies compared to just €95m in losses in 2011.
For 2013 Krischanitz does not expect further major losses as the discount rates were now at an “adequate” level making Austrian companies “interesting for investors”.
“Anything around 3.5% will most likely stay at that level with maybe only a few companies making further cuts for tactical reasons, for example to generate buffers,” he pointed out.
The use of the discount rate might also be something for the new “accounting police” unit in the supervisory body FMA to look into, which was officially launched in early July - but Krischanitz said he did not know whether pensions were on the new body’s remit or not.
Because of “the good performance of Austrian Pensionskassen” in 2012 at over 8%, their funding levels increased slightly despite the rise in obligations, he noted further.
The value of plan assets the companies held in Pensionskassen or collective company insurance schemes (BKV) increased from €2.1bn to €2.4bn year-on-year.
In general, Krischanitz did not predict any trend towards further outsourcing of pension promises by companies.
“In times when liquidity is expensive and hard to get you do not give it up that easily,” the actuary explained.
Further, he was convinced that there was “a certain level of fear” regarding volatility in Pensionskassen and the new “safety pension” introduced with the most recent pension reform did not change that.
In fact, Krischanitz said hardly any company was making new pension promises at the moment because of the economic environment and because there were still tax and regulatory hurdles facing to take new pension obligations into their balance sheets.
He argued that he would like to see non-funded company pension plans being treated equally to other pension solutions.
Further, there should be a possibility to transfer pensioners into a funded scheme to allow the companies to generate liquidity from pension assets for active members, he suggested.
Currently, outsourcing pensioners to a funded solutions requires the company to talk to each member individually.