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Germany’s Chemie misses target despite sales jump

GERMANY - Despite a 25% jump in sales of its pension last year, Chemie Pensionsfonds, the pension fund for Germany’s chemical industry, remains below targets it set itself when it launched, the fund’s chief executive says.

At the end of 2004, Chemie Pensionsfonds said it had insured 14,000 employees in the chemical sector, an increase of 25% from the previous year. Contributions from the employees, who are employed at 435 firms, totalled €16m in 2004, the fund said, adding that total volume was €40m.

In an interview with IPE, Chemie Pensionsfonds’ chief executive Martin Großmann said that while he was pleased with the fund’s results for 2004, “the fact is our performance is still below our original expectations for this time”.

Pensionsfonds, Germany’s equity-oriented pension vehicles, were created by government reforms in 2001. Chemie Pensionsfonds was one of the first of them to emerge when it launched in April 2002.

At the time Chemie anticipated that by the end of 2003 it would have gained at least 20,000 of the 200,000 chemical employees it says are its part of its potential client base. All told, 800,000 employees from the sector could, in theory, sign up for the pension.

Großmann said that beyond several competitive hurdles that Pensionsfonds still faced in Germany – partly dealing with tax – the pension’s sales were being held back by the conservatism of chemical employees.

“You would think that the promise of the Pensionsfonds, namely the ability to exploit equities to achieve high returns is argument enough. But it’s difficult to convince the employees of that amid difficult economic conditions and markets,” Großmann said.

“And when they see that Pensionskassen (Germany’s traditional pension fund vehicle) offer a guaranteed rate of interest of 2.75%, whereas we only guarantee contributions, they are more amenable to that right now,” he added.

Großmann said that if Chemie continued to increase its sales by 25% annually, it would reach its ultimate sales goal of between 50,000 and 100,000 insured by the end of the decade.

Meanwhile, the average return from Chemie Pensionsfonds’ two sub-funds – including a security-oriented one and an equity-oriented one – was 7.15% in 2004.

Taken separately, the security-oriented fund had a return of 4.4%, which Chemie said was similar to that achieved with Pensionskasse and direct insurance vehicles. Like those vehicles, the sub-fund’s equity holdings never rise above 35%. The rest is invested in fixed income and cash.

The equity-oriented fund, which invests up to 60% in this asset class, achieved a return of 9.9%. Both sub-funds invest exclusively in European equities and debt.

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