GERMANY - The stabilisation of markets at the end of 2011 was not enough to keep pension funding levels at German listed companies from "dropping considerably" for the year, according to Towers Watson.

Using a model pension plan of a company listed on the German stock exchange (DAX), the consultancy estimated that liabilities had increased by 1.6% on average over the first three quarters of 2011, while assets fell by 3.5%.

Despite a "reversal of this development" in the fourth quarter - with liabilities falling slightly by 0.4% and plan assets increasing by 1.2% - the overall trend for 2011 was still negative.

Towers Watson's model DAX plan, as at the end of 2011, was 63.4% funded, 2.4 percentage points less than in 2010.

However, Thomas Jasper, head of occupational retirement consulting at Towers Watson Germany, said local companies were "well positioned" to ride out future turbulence.

"We have seen many companies reviewing and optimising their risk management, but also the basic structure of their pension plans over the last years," he said.

Jasper said the development of DAX pension plans could actually be better than Tower's Watson's model-plan estimate, as it had not taken into account changes made in portfolios made over the course of the year.

"Because most companies are checking the development of pension assets continuously and adapt the asset allocation if necessary, the actual development can be expected to be better than the projection," he said.

Jasper added that a fully financed model pension plan set up in 2003, when Towers Watson started its pension finance calculations, would have continued to be fully funded throughout, despite various ups and downs over the years.