GERMANY – The companies listed on Germany's DAX index returned 10% on average on their pension fund assets in 2012, yet low interest rates increased defined benefit obligations.

Mercer, using the 23 annual reports of the 30 DAX companies that were available at mid-March, estimated a 12% increase in plan assets for 2012, with 10% percentage points originating from returns on invested assets.

Equities, which account for about 21% of the schemes' portfolios on average, returned 20% over the period, while fixed income, comprising 65% of portfolios on average, returned 13%.

Herwig Kinzler, head of investment consulting at Mercer, predicted that 2013 would be a rocky year for fixed income.

"Companies will have to further diversify high-return asset classes and focus on further expanding their illiquid holdings," he said.

Similar to Towers Watson, Mercer calculated a "record high" in liabilities, which increased from €256bn to €311bn year on year.

According to Mercer, this reduced the funding level by 400 basis points to 62% on average despite the strong returns.

A further burden on some companies will be the revised IAS19 standards, particularly those still employing the so-called 'corridor method', the consultancy said.

Mercer estimated that those "few" companies would have to report another €22bn in their balance sheets in total after applying the new standards.

Further, it said the new standards would lead to an increase in reporting, as companies will have to disclose the risks in their pension funds and calculate the effects of changes in the discount rate.