Henkel, the Dusseldorf-based German chemicals company, funds one half of its pensionsprovision through an insurance company arrangement, which it says leaves it to some extent as its own insurance pro-vider. The other part is funded on a standard book reserve basis.

Benefits manager Wolfgang Lorz explains that the system with Gottingen-based Goethar Lebensversich-erung (life insurance) sees employees pay half the contributions on a rising scale depending on job position.

But despite the fact that Henkel has no influence upon the issues of insurance company investment, Lorz says overall he is fairly happy with the returns.

He explains though that Henkel has some autonomy within the scheme by virtue of what he terms the 'group insurance' format of the relationship.

This means we have our own separate account and balance sheet at Goethar, which has significant importance for cost issues. To a certain de-gree this permits us to monitor the risk aspect of the investments and this influences the charges from the insurers. It is an extremely important cost aspect," Lorz says.

However, Lorz adds that returns could possibly be improved through independent asset management and that flexibility of company pensions is certainly on the agenda at present: "The issue of pension funds is a hot topic in Germany and for ourselves we know it is going to become increasingly difficult in the fu-ture to fund our benefits. A pension fund with more flexible investment returns such as a DC scheme with greater eq-uity exposure could be the answer, and there is a big question mark hanging over the issue here."

Nevertheless, Lorz explains the company's historical relationship with Goethar over 60 years as an important factor in any decision, citing its comprehensive death and retirement arrangement, which he says is better developed than most, as a crucial advantage.

"In principle I can see the advantages a more sectorial post-Emu insurance market will bring in terms of choice and possibly cost, but the shape of our current scheme, where we bear some of the risks and can influence our administration costs suits us and we wouldn't really expect any better performance from other insurers," he says.

Lorz expects to see a number of insurance mergers and acquisitions as a re-sult of Emu, which he believes can only bring benefits to companies through in-creased competition. He feels though that the safety of the German insurance market, covered as it is by the BAV regulatory authority which guards against insolvency could be a deciding element in keeping German companies domestic for their cover."