ABA-Pensionskassen can reduce rate of return
GERMANY - Pensionskassen, one of the mainstays of German pension funding, may lower their guranteed rate of return on savings from 2.75% currently to between 2.25% and 2.0% from January 2007, according to the head of aba’s Pensionskassen section.
According to Joachim Schwind, head of the Fachvereinigung Pensionskassen, the move on part of the funds was recently discussed with BaFin, the German financial services regulator.
Schwind added, however, that a final decision had not been made on a rate cut. As regulator of German Pensionskassen, BaFin would have to approve the move.
Bafin said that it was not able to confirm such a development and pointed out that the federal finance ministry had the final say on what rates are used.
Germany’s Pensionskassen already reduced the rate to 2.75% from 3.25% in 2004. Schwind was addressing a meeting of the German occupational pensions industry lobby aba in Bonn.
Yet not all German Pensionskassen offer a guaranteed rate of return on paid-in savings from employees. Hamburger Pensionskasse of 1905, a €2.7bn umbrella scheme for six German multi-employer pension funds, offers no such guarantee, arguing that it would be detrimental to its business.
Hans Stapelfeldt, board member at Hamburger Pensionskasse, has said in the past that the 2.75% guarantee would both restrict the fund’s ability to achieve a higher return and be a burden to the companies behind the fund.
“Merely guaranteeing retirement contributions is good for our employers, as they do not have to cough up the additional mon-ey if the fund does not meet its promised rate of return,” Stapelfeldt told a trade magazine last year. In 2003, Hamburger Pensionskasse had a return of 5.1%.
Still, Pensionskassen offering no guarantee beyond that for paid-in savings, are still prevented from investing more than 35% of their holdings in equities. Since the introduction of hedge funds in Germany last year, they may also invest up to 5% in hedge funds.
Separately, Schwind said assets held by German Pensionskassen totalled €78.3bn in 2003, up 5.1% from the previous year. Total pension assets in Germany for the year were €367bn, with the Direktzusage, or book reserves accounting for €215bn.