Metzler, the German bank, has set up a Pensionsfonds to provide occupational pensions based on the social partners’ model, which means social partners can negotiate pure defined contribution (DC) occupational pensions without guarantees and employers’ liability through collective bargaining agreements.
The social partners’ model was introduced in 2018 with the law to reinforce occupational pensions, the Betriebsrentenstärkungsgesetz, but so far employers and employees have yet to sign agreements to finance pension provisions within the new framework.
Last month the financial supervisory, BaFin, gave Metzler the green light to establish its Metzler Sozialpartner Pensionfonds, which runs the new form of occupational pensions.
The board of directors for the new Pensionsfonds include Christian Remke, Martin Thiesen and Steffen Beltz. Metzler Asset Management is the asset manager for the fund, while B. Metzler seel. Sohn & Co. KGaA is the custodian.
Metzler runs another Pensionsfonds for companies to outsource pension obligations. Thiesen said the “decisive element” that led the bank to taking the strategic decision to set up a new social partners’ Pensionsfonds was to split the assets of the two Pensionsfonds.
The bank wanted to avoid mixing up the “funding [pension] promises” model with the “capital investment without guarantees” model, it said.
As a result of the split, the asset allocation “is clear and easier to understand for the social partners,” it added.
Sustainable Committee calls for Pensionkassen asset class diversification
The Sustainable Finance Committee, a group of experts advising the German government on a sustainable finance strategy, has recommend in its final report that Pensionkassen should expand their investment catalogue as per the investment ordinance (Anlageverordnung) for Pensionkassen.
The committee suggested that financial flows should be redirected into sustainable investments, from infrastructure to technology, to “unfit” value chains in terms of ecology or human rights.
The investment catalogue designs a framework for Pensionskassen investments.
According to the committee, investments in infrastructure, which are important to finance the transition to a sustainable economy, are not considered as a separate asset class, but as a form of investment, without taking into account specific risks.
This, according to the final report, creates competition between investments in assets that lead to reducing the volume of long-term investments relevant to transform the economy.
Furthermore, specific asset classes should be added to the regulation with limits on investment reflecting the actual risk, it said. Stress tests for funding requirements should shift the focus from market price risks to credit default and counterpart risks, it added.
In the final paper – Shifting the Trillions, a Sustainable Financial System for the Great Transformation – the committee advised for a push to expand the rules on climate impact reporting of companies with more than 250 employees at EU level.
The report also recommends establishing a system to classify financial products as sustainable based on the logic used to design the EU disclosure regulation, but to further develop the system with the support of an independent team of various stakeholder groups to set an example in Europe.
Public authorities should facilitate the establishment of regulated impact funds based on blended finance in Germany. The funds would mobilize capital from the private sector and disclose their sustainability impact.
For institutional investors, the committee recommended building the legal basis for collaborative ESG engagement and developing a German stewardship code (Responsibility Code) to drive engagement activities.
The government should also design an “ambitious concept” for the investment of federal funds, including pension reserves, pension schemes in general and the pension fund for the Federal Employment Agency, the report added.
The committee recommended that public pension fund investments are in line with the goals of the Paris Agreement, the climate and environmental goals of the EU Green Deal, the UN guiding principles for business and human rights and Agenda 2030.
Deutsche Telekom’s pension obligations rise
Pension obligations at Deutsche Telekom rose in 2020 to €7.68bn, up from €5.83bn in 2019, according to the company’s financial results.
The increase year-on-year of pension provisions is mainly the result of the depreciation of the fund’s stake in BT and adjustments of its actuarial interest rate. This resulted in a total loss from the revaluation of its defined benefit plans worth €1.4bn. Its book value increased, howwever, by €800m in connection with the merger between T-Mobile US and Sprint.
Deutsche Telekom reduced its actuarial interest rate to value pension obligations in Germany from 1.14% in 2019 to 0.85% in 2020, and from 0.29% to 0.07% in Switzerland, it said. In the US its actuarial interest rate stood at 2.75% in 2020, according to the company’s financial results.
The company set up benefit plans in Switzerland financed by employer and employee contributions through the independent pension fund of its subsidiary T-Systems.
The majority of the group’s pension obligations are direct and indirect pension promises in Germany, in the US and in Switzerland.