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KPMG finds lack of governance in German company pensions

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Half of the large listed companies in Germany still have much to do when it comes to the governance of their pension funds, according to Susanne Jungblut, director of Solution Compensation & Benefits at KPMG Germany.

Jungblut also warned that, judging by the results of a recent survey of one-third of those companies listed in the DAX and MDAX indices with more than €100m in pension liabilities the “need for action” was likely to be much higher among smaller companies, which “still often have large defined benefit obligations” on their balance sheets.

“Especially in the low-interest-rate environment, risk management of pension liabilities has significant importance and should be tackled,” she said at the Handelsblatt conference in Berlin.

The survey found that, while 90% of the companies surveyed regularly run ALM studies, only around half of those do so quarterly or monthly.

Similarly, the legally required ‘sensitivity analysis’ of liabilities is conducted only once a year by one-third of the companies, while half of respondents conceded they did not know how often such analyses were conducted.

“This is not sufficient given the fast economic developments,” Jungblut said.

She added that, while most companies actively include their actuaries in assessing pension risks, she was worried about the minority where the actuary seemed to be the only one with knowledge of that risk.

Jungblut also said it was “really bad” that a minority of companies lacked any defined responsibilities regarding pension risks.

Special reporting tools for pensions, a pensions committee and a pensions governance directive were each found in half of the surveyed companies, respectively.

Jungblut noted that German companies had “become aware of the relevance of pension governance and had also recognised the need for action”.

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