GERMANY - German listed companies' pension plans returned 4-5% on average last year, depending on their equity ratio, while funding levels remained virtually unchanged year-on-year, according to Towers Watson.

For companies listed on the DAX index, pension plans returned 4% on average, while those listed on the mid-cap MDAX index returned 5%.

Thomas Jasper, pension expert at Towers Watson, said: "The equity quota in the MDAX is a little bit over that in the DAX."

On average, equity investments contributed to the full-year performance with a positive 9.5%, while bonds lost around 2.8%, which has had a larger impact on portfolios given German pension funds' overweight bond positions, the consultancy noted in its latest "German Capital Market Update".

Due to a number of interest rate changes, funding levels and liabilities have been very volatile over the last year.

In the fourth quarter alone, funding levels rose by 5.2% after an increase in the discount rate, or Rechnungszins, of 64 basis points.

This largely cancelled out a drop in funding levels over the first three quarters and brought the figure back to the year-end 2009 level of around 66%.

Liabilities in listed companies' pension schemes increased by 4.1% year-on-year despite falling by around 8.6% in the last quarter to around €231bn.

A drop in the discount rate by 74bps from 5.34% to 4.6% over the first three quarters had previously led to a considerable increase in liabilities.

Jaspers pointed out that most German companies did not cut pension spending during the crisis despite other cost-cutting measures.

"This shows how important occupational pensions are for entrepreneurs," he said.