GERMANY - Medium-sized companies are not preparing to finance their pension liabilities fully as new accounting standards take effect, the chief executive of Allianz Pension Partners has warned.
At the end of this year, German companies will for the first time move away from current domestic accounting regulations (HGB) as the Bilanzrechtsmodernisierungsgesetz (BilMoG) takes effect, bringing the country closer to international accounting law.
According to the new legislation, employers will have to fund all pension liabilities fully, something that is already the case for DAX 30 companies that report using IFRS standards.
However, only a third currently have the necessary assets to fund the liabilities.
Martin Katheder, chief executive at Allianz Pensions Partners, said the lack of preparation came partly from a longstanding tradition of viewing occupational pension arrangements as a matter for the human resources department, rather than a company's financial officer.
"We've noticed there is a relatively low interest on the part of medium-sized companies in actively engaging with the pension liabilities their current retirement schemes have accumulated," he said.
He said this was in spite of the fact many of the companies surveyed had found themselves with more liquid assets than during the downturn, which could be used to address the issue ahead of BilMoG's implementation.
However, due to the way the current accounting rules view pension liabilities, companies gained little from fully funding all liabilities.
"For us," said Katheder, "the question now is: Is this happening deliberately because they want to continue managing pension liabilities themselves, or is this happening because of a lack of motivation to address the issue of liabilities?"