German roundup: North Rhine-Westphalia, Wacker PK, Solvency II
GERMANY - The province of North Rhine-Westphalia (NRW) must withdraw money from the pension fund set up for civil servants following a decision by the province's constitutional court.
The court ruled that increasing the debt in the provincial budget even further would be unconstitutional.
Among the projects NRW wanted to finance was a top-up of the pension fund set up for civil servants, €90m of which had already been paid into the fund.
In a statement, the regional finance ministry said the withdrawal was technically "not a problem". But it added that the risks the province's government wanted to minimise with these payments would "hit the province" in 2011 and the following years.
The local government hopes that higher economic growth and other factors will lead to higher tax income that will allow the province to make the planned payments this year.
Elsewhere, German Pensionskassen warned that the application of Solvency II to occupational pension providers would lead to a major hike in capital requirements, rendering this form of supplementary pensions unattractive.
Ulrich Clarenz, risk manager at the Pensionskasse for Wacker Chemie, said the long duration of liabilities in a Pensionskasse meant minor changes to the discount rate or the valuation of assets had major effects on capital requirements.
The actuary calculated that the application of Solvency II would mean Pensionskassen would have to have 30% of their market capitalisation - or, in some cases, as much as 40% - in capital requirements.
Currently, the capital requirements derived from Solvency I add up to around 5% of the pension assets.
Joachim Schwind, head of the board at the Hoechster Pensionskasse, estimated that capital requirements for his fund would increase by three to four times should Solvency II be applied.
He added that most German Pensionskassen had already implemented qualitative features of Solvency II through regulations including the risk management directive MaRisk.
He said the increase in capital requirements, as well as the additional administration required to implement more complicated systems, would lead to additional costs for plan sponsors and members.
Thomas Mann, MEP for Germany, also warned that, in the Green Paper on pensions, the EU has pointed out that Solvency II is a "good starting point" for new regulations regarding the solvency requirements of institutions for occupational retirement provision.
He estimated the application of Solvency II would increase costs by 30-40%, "endangering" the German voluntary system of occupational pension provision.