Pension buyout providers in Germany are seeing strong and sustained interest from corporates seeking to de-risk their balance sheets, with multiple transactions either finalised or in advanced stages of discussion this year.
Hanne Borst, head of retirement Deutschland at WTW, said the consultancy is currently engaged in numerous negotiations with companies looking to offload their pension obligations.
“We see opportunities [for pension buyout transactions] both at German companies and at subsidiaries of international companies,” she said.
WTW, which announced plans last year to establish a Rentnergesellschaft — a German pension vehicle used to transfer liabilities – has now largely implemented its buyout structure.
The firm offers advisory services, administration, and pension accounting, and facilitates contribution redemption via a contractual trust arrangement (CTA). It also provides tailored investment strategies to match long-term obligations.
“We use the governance structure of the existing funding platform, which currently consists of a support fund (Unterstützungskasse), a group CTA, and a Pensionsfonds,” said Borst.
Investment services are delivered through WTW Investment, which also conducts manager research to align portfolios with beneficiary needs.
As part of its buyout framework, WTW includes a Munich Re reinsurance policy to mitigate risks associated with pension promises. This approach is particularly geared towards transactions involving smaller groups of beneficiaries.
“The guaranteed benefits are calculated using market interest rates. This makes the terms offered significantly more attractive than those offered with conventional products,” Borst added.
Robust interest
While the German pension buyout market remains at an early stage of development, providers continue to see robust interest from corporates aiming to reduce financial risk and remove pension obligations from their books. Common triggers include M&A activity, business unit carve-outs, and corporate liquidations.
This week, specialist provider Vedra Pensions assumed the pension liabilities of Frankfurt-based OWH, formerly the European subsidiary of Russia’s sanctioned lender VTB Bank. The transaction is part of OWH’s full wind-down process, following EU sanctions imposed on its parent in 2022.
Vedra will take over a Rentnergesellschaft established to facilitate the pension transfer, with liabilities backed by a double trust structure (CTA) and assets managed via a Spezialfonds, the firm said.
The transaction, which Vedra described as being in the “double-digit million” euro range, is one of four buyouts it has completed so far this year. The firm has also taken over the pension obligations of AST Deutschland and Hauck Aufhäuser Lampe – now operating as Bethmann HAL – and signed another deal with a German entity in May.
“We hope to be able to announce the transaction [with the German entity] sometime in October,” said co-chief executive officer Michael Christner.
He confirmed rising interest in buyout transactions but noted that completions are often contingent on regulatory and operational timelines.
The latest digital edition of IPE’s magazine is now available
No comments yet