The contribution rate for members of the Pensions-Sicherungs-Verein VVaG (PSVaG), the mutual insurance association for German occupational pension schemes, was set at 4.2‰ (promille) in 2020, the highest level since 2009, compared with 3.1‰ (promille) in 2019, according to PSVaG’s latest financial report.
Contributions grew from €1.08bn in 2019 to €1.48bn last year, while the number of insolvencies ended up at the lower end of set expectations in the third quarter of 2020, trend that continued into Q4 as well, it said.
This led the PSVaG in July to call members for a potential increase in the contribution rate to up to 5‰ (promille) caused by the effects of the COVID-19 pandemic.
The number of insolvent companies under the protection of the PSVaG rose, however, year-on-year by 16% in 2020 to 503, compared with 434 in 2019, even though the number of bankruptcies in Germany continued to decline by 13.4% to 16,300 during the period.
As a result, the PSVaG had to take over a total of 48,100 beneficiaries or persons entitled to company pensions, the highest number since the crisis in 2009, compared with 18,400 in 2019.
In total, 11.1 million beneficiaries were under insolvency protection in 2020, approximately 14,000 more than in the previous year, including 4 million retirees and 7.1 million employees with vested benefits.
Around 95,000 employers registered with the PSVaG to protect company pension schemes at the end of 2020, up from 95,250 in 2019.
The PSVaG paid €58m directly to beneficiaries in 2020 and set aside €4.5bn to cover its obligations until the end of December 2020.
Losses stood at €1.59bn last year, up 34% compared with €1.18bn in 2019. Total assets amounted to € 8.3bn in 2020, up from €7.5bn the prior year, inducing €214m from the cooperation with a consortium of German life insurers to process the transfer of pensions.
The compensation fund received €54m last year to reach a total of €3.2bn, up from €3.1bn in 2019.
Hedging measures to protect performance
The performance on investments yielded 2.5% last year, while net return stood at 1.11%. The PSVaG implemented hedging measures at an early stage to protect the portfolio from the impact of the COVID-19 pandemic.
Returns on investment reached €78.1m in 2020, compared with €79.3m in 2019. In the year under review, a total of €1.23bn (book value) was invested in bonds held directly in portfolio, with a focus on short-term investments of up to three years.
The PSVaG has further developed its sustainability approach for risk management and investments – it integrates environmental, social and corporate governance (ESG) standards to select issuers.
It also applies sustainability criteria into active investment strategies for indirect investments, with mandated asset managers that are signatories of the UN Principles for Responsible Investment (UNPRI), reporting on ESG and greenhouse gas emissions.