Pension liabilities of German companies listed in the DAX index rose to a “historic high” of €396bn at the end of 2016, according to Mercer.

The figure compares to €361bn in 2015, an increase of 9.7%.

Mercer analysts looked at 20 annual reports covering almost 80% of pension liabilities in the index.

This increase is only visible on the companies’ books, as some of their pension plans are unfunded and there is no obligation to hold reserves up to the level of liabilities.

Interest rates hit a low in September last year, which especially hurt company accounts with a financial year ending in that month.

This was particularly hard on ThyssenKrupp which had to calculate its liabilities with a 1.3% discount rate (“Rechnungszins”). The development could be significant in any possible negotiations with Tata Steel on a takeover.

Siemens and Infineon – which also have financial years ending in September – had to lower their discount rate to 1%.

Overall the lower rate applied to DAX liabilities led to actuarial losses amounting to around €44bn.

“But these losses do not affect the annual results as they have to be listed separately with no effect on earnings,” explained Thomas Hagemann, chief actuary at Mercer Germany.

Falling interest rates helped German DAX companies’ bond portfolios create more return, as did favourable equity market developments.

Pension assets as calculated under IFRS increased from €236bn to €251bn. Therefore, the average funding level remained almost the same, only dropping slightly from 65% to 63%.

According to Carl-Heinrich Kehr, principal and investment expert at Mercer Germany, broad diversification helped last year: “High yield bonds profited in their annual return of 14.8% from the fact that there were fewer defaults than expected.”

He emphasised the contribution of emerging market debt (10.2%) and equities (14.9%) – especially compared to European equities (4.5%) – in the wake of Brexit.