GERMANY - German blue-chip firms' pension schemes will be fully-funded by 2010 - if current trends continue - according to consultant Rauser Towers Perrin.

In a new study, RTP found that the pension schemes of the 30 firms on the main Dax index saw their funding ratio rise to 65% at the end of last year from 60% six months before.

"If the current funding trend continues, the companies' pension schemes will be fully funded by the end of the decade," said Thomas Jasper, an RTP principal who co-authored the study.

"However, we do not expect this, as there will be a number of firms who will want to use capital for other purposes than pensions," he told a press conference in Frankfurt today.

The RTP study also reflected that the Dax firms' pension liabilities fell slightly (0.2%) in 2006 due to a small hike in an interest rate known as the Rechnungszins. The value of their liabilities - domestic and foreign - was put at €246bn.

Increases in the Rechnungszins diminishes the amount of core capital firms need to meet their pension obligations and vice versa.

Of the Dax firms scrutinised by RTP, German real estate firm Hypo Real Estate, Deutsche Bank and software firm SAP had funding ratios that exceeded 100%.

The study further showed that the Dax firms provided €15.6bn for pension plans last year. Two-thirds of that money came from energy firm E.ON (€5.2bn), finance giant (€2.15bn), Commerzbank (€1.4bn) and automaker DaimlerChrysler (€1.2bn).

The money supplied by E.ON and Commerzbank was for newly-created external pension funds known as contractual trust arrangements (CTAs).

Around two-thirds of Dax companies have created CTAs since the late 1990s to finance pension obligations. The remainder of the group still relies on the traditional method of paying pensions via balance sheet assets.

Finally, the RTP found that there was only a slight adjustment in the asset allocation for the pension schemes of Dax firms last year.

In 2006, a good year for stock markets, the schemes' equity allocation was 41.5% compared with 41.3% in 2005.

Meanwhile, the schemes raised their bond exposure to 46.6% in 2006 from 44.5% in 2005 while cutting investments in alternatives - private equity, hedge funds and derivatives - to 6.5% from 8.1%. Real estate exposure declined to 5.4% from 5.9%.