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Impact Investing

IPE special report May 2018

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Bosch CFO mulls pan-European pension fund

GERMANY - Gerhard Kümmel, chief financial officer of German auto component maker Robert Bosch, has signalled the firm may create a pan-European pension fund out of its existing German Pensionsfonds.

"Of the 260,000 people we employ worldwide, 180,000 are in Europe. It is therefore conceivable that, at some point in the future, a cross-border pension fund will emerge from our current Pensionsfonds that optimises the financing of our various European pension plans," Kümmel said at a event in Frankfurt yesterday.

The EU occupational pension fund directive, which was transposed into German law last summer, permits German firms to create pan-European schemes. According to a recent study by German consultant Rauser Towers Perrin, 42% of big German companies are planning some type of pan-European pension fund by 2010.

In 2002, Bosch was one of the first German companies to make use of new legislation establishing Pensionsfonds, Germany's answer to the Anglo-Saxon pension fund. The others are Deutsche Telekom and as reported by IPE last week, Siemens.

Since its launch, Bosch's Pensionsfonds has racked up €500m in assets and serves 133,000 current and former employees in Germany.

Kümmel also unveiled a scenario, a copy of which was obtained by IPE, under which its Pensionsfonds will account for around half of its €7bn in pension liabilities by 2026. The other half of the firm's pension liabilities are to be met by book reserves.

Bosch currently transfers €75m to its Pensionsfonds annually and €25m to its old book reserve-funded pension plan. According to the Stuttgart-based firm, the Pensionsfonds assets are invested according to a life-cycle model.

Under the model, the assets are split 50-50 between equity and fixed income funds until the employee reaches the age of 55. After then, the equity portion drops until, at retirement, it totals 20% while fixed income totals 80%.

Klaus Heubeck, chief executive of the eponymous German pension advisor, also attended the Frankfurt event. There, he claimed that the €230bn in book reserves held by German firms "were sufficient" to meet their pension liabilities.

Heubeck's comments come about a month after an alarming study unveiled by Mercer Human Resource Consulting. According to it, the pension deficits at leading German firms equalled 12% of company value. This compares to 4% in France, 3% in the UK and US and 2% in the Netherlands.

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