Verena Volpert, head of finance at E.ON, told delegates at Handelsblatt’s occupational pension conference in Berlin that German companies were “suffering severely” because of past pension models.
At the German energy company, for example, pension payouts are already twice as high as current service costs, she said.
Since E.ON established its Pension Trust in 2008, pension liabilities, which stood at €40bn at the time, increased by €6bn “simply because of a lower discount rate”.
“This,” Volpert said, “is an increase in debt I have to put into the accounts and explain to rating agencies.”
She lamented the absence of any model to “help us deal with these past promises”.
Under German law, it is nearly impossible to make changes to pension benefits that members have already earned based on their number of work years.
Rupert Felder, senior vice-president at Heidelberger Druckmaschinen, said pension promises made in the “good old days” were an “offside trap” that often threatened a company’s financial situation.
“German employers want to offer their staff benefits, but only under comprehensible conditions and not without the possibility of making changes,” he said.
Friedemann Lucius, a board member at German actuarial firm Heubeck, said making amendments to pension promises for past services was “virtually impossible” under current regulations.
But he added: “I am convinced amendments regarding past services will come, as they have already in other countries, but, in Germany, this will require a broad consensus because it will interfere with property rights.”
In Germany, the so-called Lex Bosch law allows Pensionsfonds to offer a basis pension with flexible top-up elements.
However, most companies can make changes only to future services – pension promises active workers have not yet “earned”, for example.
The company simply requires “objectively proportionate” reasons for the changes, which the low-interest-rate environment could be argued to be.
Heubeck’s Lucius called on authorities to simplify amendments to future services and ease the burden of rising liabilities for German companies.
Another option for German firms, Handelsblatt delegates heard, would be to change pension plans for new entries completely.
But André Neiß, chairman of the board at transport company Üstra, said the planned switch to defined contribution for new entries in the pension plan had caused “significant conflicts” with the union.
“The discussion is very difficult, and a lot of communication effort is still needed,” he said.
“If we cannot achieve a radical change in retirement provision, we will have no room to manoeuvre.”