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Dax firms see pension liabilities drop €10bn

GERMANY - Pension liabilities for the 30 firms traded on Germany's blue-chip Dax index have declined by €10bn since January, according to German pensions consultant Heissmann.

Heissmann attributed the decline to an increase in the so-called "Rechnungszins" used by the firms, to 5% on May 31.

The Rechnungszins is used when calculating how to meet pension liabilities with an average duration of 10 years.  When the rate increases, the amount of core capital firms need to meet their pension obligations diminishes and vice versa.

"This compares with an all-time low of 3.4% at the end of August 2005. The last time a ‘5' stood in front of the decimal point was in November 2003," Alfred Gohdes, managing director of Heissmann, told IPE.

"This is welcome news for companies operating pension plans in the Eurozone, in particular after the storms during the period 2000 to 2003," Gohdes added, referring to severe financial strain on Dax firms caused by the equity market crash during the period.

Heissmann also said the outlook for pension funding by Dax firms was clearly positive.

Rauser Towers Perrin, a Heissmann rival in Germany, said last April if current trends continue, the pension schemes for Dax firms could be fully-funded by 2010.

According to an RTP study, the schemes were 65% funded at the end of 2006 compared with 60% six months before then.

But RTP principal Thomas Jasper said he did not expect the companies to fully fund their pension schemes, "as there will be a number of firms who will use capital for other purposes than pensions".

Almost two weeks ago, US consultant Watson Wyatt said it would acquire Heissmann, Germany's leading actuarial and pensions consulting firm, for an undisclosed amount.

In the deal, to be closed in early July, Watson Wyatt is buying stakes in Heissmann held by German insurer Allianz, Buck Consultants of the US and Heissmann's partners.

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