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IPE special report May 2018

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BaFin finds pension funds in good health

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GERMANY - The German financial supervisory authority has stress-tested 125 Pensionskassen and found most of them able to survive a financial crisis.

Only five of the pension providers showed negative results in more than one of the four scenarios which the BaFin tested them on, another six had problems in one scenario, albeit no details on which scenario or the names of multi-employer Pensionskassen were given.

The results are similar to last year when 107 out of 126 Pensionskassen passed the test.

However, one stress test scenario added this year included an 8% drop in returns from real estate investments coinciding with a 20% fall in the stock market.

Other scenarios the BaFin has assumed include a 35% drop in equities, a 10% fall in bond yields, a concurrent decrease of 20% in equity returns and 5% in bond returns.

According to the financial service authority's annual report, in all negative cases the "level of underfunding was marginal".

And 31 Pensionskassen with a very low risk in their asset allocation were excluded from the stress test.

Statistics collected by BaFin reveal neither private equity nor hedge fund investment by Pensionskassen has increased over the last year. From a total of €92bn in Pensionskassen, just 0.1% of assets are invested in private equity and 0.5% in hedge funds while assets in Pensionskassen has increased 7.4% over the last year from €86bn to €92bn.

And among the 24 pension funds for individual companies, the BaFin found each one able to meet its pension obligations at the end of this year as the aggregated amount invested by the pension funds was €1.1bn in 2005.

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