GERMANY - The pension schemes of companies listed on Germany's DAX index have strengthened their funding levels significantly over the last decade, Towers Watson has found.

In its latest German Pension Finance Watch, the consultancy noted that, since 2000, the funding level of the average pension plan of a listed German company had increased from 54% to 66% in 2011.

Over the short term, funding levels fell by 36 basis points over the first half of this year to 62%, due chiefly to the discount rate having dropped by 66bps to 4.1%.

This increased the pension liabilities of all DAX-listed companies to €281bn, compared with €259bn at year-end 2011.

"This could not even be offset by the good returns on pension assets of 4%," Towers Watson said, adding that the current size of pension assets was approximately €174bn.

But the consultancy stressed that German companies had "continuously improved" funding levels at their pension plans over the last decade, despite the short-term drop.

It also pointed out that German schemes had resisted the temptation to dip into these reserves even during the "difficult" period of 2008-09.

Towers Watson made its comments in response to an ongoing debate in Germany on the impact of low interest rates on occupational pension funds.

Several German newspapers recently quoted economics professor Bernd Raffelhüschen as saying that many occupational pension vehicles were facing "serious difficulties" due to the low interest rate environment.

But the VFPK, the association of company pension funds, said occupational pension schemes were safe because of their long-term and risk-averse investment strategies.

Peter Hadasch, head of pensions at Nestle Germany and chairman at the VFPK, stressed that company pension schemes would be able to "absorb" short-term losses because of their long-term horizons.