AUSTRIA - Consultancy firm Arithmetica has claimed the recent financial crisis is further proof that occupational pensions are better left on the companies' books than in separate arrangements.
While company pension plans have also suffered from the general market downturn, developments in the corporate bonds market had a positive effect on the liabilities of the schemes, noted Christoph Krischanitz, head of the actuarial consultancy, who last summer had advised companies to keep pension assets on their books. (See earlier IPE article: 'Keep pension reserves on books' - consultant)
"The financial crisis has of course not only had a direct impact on the pensionskassen but also on other forms of occupational pensions, such as the direct benefit obligations by companies," he pointed out.
For example, while a new longevity table increased companies' liabilities last year, the yield for AA-rated bonds "have been all over the place" as banks have been punished with higher spreads for the drop in their credit status.
This in turn has led the discount rate used for calculating pensions in companies' accounts to range from between 4% and 6.7% during the turbulence, though this has ultimately reduced liabilities.
That said, Krischanitz noted that all of these positive effects have been cancelled out with companies which had to pay more into pensionskassen to level out losses.
Nevertheless, Arithmetica has calculated that Austrian companies still have approciamtely 14x more in equity than is now needed to pay for pensions.
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