AUSTRIA - Consultancy Arithmetica has recommended Austrian companies keep their pension reserves unfunded for now because of market turbulence.
The 58 companies in the Viennese stock markets' top segment - the ATX Prime - have transferred approximately 30% of their pension reserves to Pensionskassen or life assurance-based schemes, but evidence from an annual survey of pension reserves in this market segment shows the rest is still on the books, according to the consultancy which is part of the Wiener Städtische Insurance Group.
"Austrian companies remain the second-largest pension provider after the State and it should stay that way over the near future as financial markets are not showing enough stability at the moment to warrant transfers of pension reserves," Christoph Krischanitz, chief executive of Arithmetica, told journalists in Vienna.
He argued Austrian companies were well-placed to earn more return for the pension reserves than any vehicle investing on the capital markets at present.
According to the consultancy's findings, the ATX-Prime companies - which include large banks, petrol company OMV, energy group Verbund and road construction company Strabag - managed to generate an average return on their pension reserves of 6.35% over the last year.
Krischanitz compared that to the 2% return average for Pensionskassen and suggested "Austrian companies are strong enough to keep up this level of return as the Austrian economy is stronger than international financial markets".
Survey findings showed banks and insurance companies tend not to outsource their pension reserves to pensionskassen while other sectors like services, energy and industry outsourced roughly half of their reserves.
The capital reserves of Austrian companies are large enough to cover pension reserves 11 times if necessary, the consultant pointed out.
Last year was a good year for pension funds reserves as higher interest rates eased the burden on companies considerably and actually generated actuarial gains of €33m on the books compared to actuarial losses of €289m the year before.
However, Arithmetica noted the figures were not fully comparable as there were some major changes to the ATX Prime segment over the last year.
Following its integration into the Italian UniCredit Group, one of the largest pension providers, the BA-CA bank dropped out of the Austrian stock market while road construction company Strabag had its IPO last year.
BA-CA alone had around €4bn in defined benefit obligations (DBO) with the entire ATX-Prime segment reported €6.5bn in DBOs, compared with €9.4bn in 2006 including the BA-CA.
As all companies on the Vienna stock exchange are obliged to use IFRS accounting standards and are using the same longevity tables produced by the Austrian actuarial federation, the pension reserves on the books are quite transparent, the consultancy noted.
However, Krischanitz added some companies were less detailed in their disclosure than others, in particular, omitting risks from pension provision in the group's risk report or not stating actuarial assumptions like interest rate or development of wages.
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