GERMANY - Pensionskassen in Germany have survived the second major crisis since their implementation but Peter Hadasch, chairman of the association of company Pensionskassen VFPK, believes there is scope for further growth.
Over the last 10 years the number of companies in the 15 multi-employer pensionskassen, which the VFPK represents, has more than tripled reaching 3,942 last year.
At the end of 2008, the pension funds within the VFPK had an equity exposure of 18% compared to 27% the year before while fixed income investments rose from 18% to 28%, the VFPK revealed exclusively to IPE in the first results from this year’s member poll.
The rest continues to be mainly invested in loans (45%) and directly-held real estate (4%).
Over five years the pensionskassen managed to return net interest of 4.83% while at the end of 2007 the five-year average had been at 5.21%.
“The vehicle of the pensionskasse is and will remain attractive and there is enormous growth potential too given the fact that the number of collective bargaining agreements, including pension provision, areincreasing,” said Hadasch in an interview with IPE.
He pointed out the German pensionskasse, which is an insurance-based retirement vehicle, offers certain securities and guarantees to small companies who have to put in place an occupational pension scheme because their employees demand it.
“Those - mostly large international - companies which want to invest their pension assets on the capital market have already done so years ago - but those small companies setting up a pension scheme now want security,” pointed out Hadasch.
He added none of the member funds of the VFPK was currently in danger of going bankrupt.
“There are no major reserves left but because of investment restrictions and quarterly stress tests there are no substantial financial losses,” he explained.
Pensionskassen in Germany have to hold enough reserves to be able to cope with losses from their equity exposure, which is capped at 30%.
Any losses in the fund have to be balanced by the scheme members, though in this case the members are technically the companies.
“All members can choose how much risk they take,” Hadasch noted.
He claimed the trust of employers and their companies is very high in Germany and people are happy to see their pensions invested even on a volatile capital market as long as the employer is balancing out any losses.