The German parliament, Bundestag, has approved a law that facilitates the bailout of Pensionskassen by sponsoring companies.
The new section 234 paragraph 7 of the Insurance Supervision Act (VAG) gives Pensionskassen the opportunity to change their statutes to improve the framework conditions to receive funding from employers if their financial situation deteriorates.
The new rule should enter into force in 2022.
Sponsoring companies currently deploy their own funds to close deficits in Pensionskassen, ultimately covering also employers that do not provide financial support to pension funds.
This, according to the legislator, leads to a blockade, with either all sponsoring companies agreeing to financially supportng Pensionskasse or none. The mechanism may become unsustainable particularly for Pensionskassen structured with multiple sponsoring companies.
The new rule opens up the possibility for companies to financially strengthen the assets in a Pensionskassen they are liable for.
Within a low interest rate environment, Pensionskasssen may depend on receiving additional funds from sponsoring companies in order to provide occupational pension benefits in full and continue business activities, possibly by taking on new businesses.
Jürgen Rings, head of the Pensionkassen working group at occupational pensions association Aba, said: “Aba will support its members in the implementation and use of the new regulation in close cooperation with supervisory authority BaFin.”
The government had proposed the draft law to restructure Pensionskassen to apply the EU 2020/1504 directive on crowd funding service providers.
Swiss schemes improve funding ratio
The funding ratio of Swiss pension funds at the end of 2020 reached on average 113.5%, compared with 111.6% at the end of 2019 – the highest level since 2012, according to figures published by the federal pensions regulator Oberaufsichtskommission (OAK BV).
Swiss pension funds achieved average net returns on assets of 4.4% in 2020, down from 10.4% in the prior year, despite the persistently high level of uncertainty in the real economy and in capital markets caused by the COVID-19 pandemic, it said.
Funding ratios dipped to 102% at the end of March last year, as the pandemic progressed.
Equities and real estate performance numbers improved significantly from the summer last year, especially towards the end of 2020, to lead to a funding ratio above 2019 levels, it said.
The share of underfunded pension funds decreased to 1.0% last year compared with 1.1% at the end of 2019. Almost all (99%) private and public pension institutions without a state guarantee and without full insurance solutions had a funding ratio of at least 100%.
OAK BV stressed that the minimum conversion rate of 6.8% used to calculate pension pay-outs from accrued assets upon retirement was still too high in view of the low interest rates and increased life expectancy.
The average interest rate on the pension capital of the active insured members at pension institutions without a state guarantee and without a full insurance solution stood at 1.84% in 2020, down from 2.40% in 2019. It was 2.10% compared with 2.80% in 2019 for pension institutions with a state guarantee.
OAK screened 1,454 pension schemes with total assets of €1.12trn.
VBV greens portfolio
Austrian pension fund VBV has cut the carbon footprint for its asset portfolios in its Pensionskasse and Vorsorgekasse.
The CO2 footprint for the VBV Pensionskasse fell by 49 tons year-on-year to a current value of 140 tons of CO2 per million euros invested. The value is 6.9% above the benchmark, it said.
The CO2 footprint for the the VBV Vorsorgekasse decreased by 3.7 tons to 75.5 tons of CO2 per million euros invested, 32.6% below the standard value of the MSCI World Index.
Last year the Vorsorgekasse extended its exclusion criteria to all companies active in the fossil fuel sectors. It had already ivested from companies generating at least 5% of its turnover from mining coal.
VBV has restructured its equity portfolio in the middle of the financial crisis.
“Today our equity portfolio is almost 90% sustainable – the focus is on climate strategies and innovation in the fight against climate change,” said Günther Schiendl, member of the board of directors of the VBV Group and the VBV Pensionskasse head of investments.