The German financial supervisory authority, BaFin, is nudging Pensionskassen that are closed to new members to consider the possibility of transferring pension contracts and assets to larger peers.
Half of the country’s Pensionskassen “are run-off and don’t receive fresh capital”, but the administrative costs increase, and the regulatory requirements remain, Andreas Seiltz, director-general for group supervision, institutions for occupational retirement provision, at BaFin told IPE on the sidelines of an event organised by German occupational association Aba this week.
“We see a number of Pensionskassen that think about how to proceed […] we as BaFin welcome and support those thoughts,” he said, adding that large Pensionskassen are ready to take over other pension portfolios.
In one of the latest deals, Frankfurter Leben took over close to 150,000 insurance pension contracts and around €2.8bn invested assets from Generali’s Pensionskasse.
The number of Pensionskassen, which is one vehicle to provide occupational pensions in Germany, has decreased over the years as the market continues to consolidate.
According to BaFin, the Pensionskassen market is growing overall, with the number of those entitled to an insurance pension contract that has increased in the last five year to reach over 10 million.
Financial situation
Rising interest rates have had a positive impact on the financial situation on Gereman Pensionskassen. The number of schemes that are now under intense scrutiny by the regulator has dipped to below 20, from 40 a few years ago, BaFin said in its annual report for 2023.
The regulator is now concerned about Pensionskassen reserves held as real estate holdings, noting that this might put them in a situation where they are hardly able to compensate for unexpected depreciation, and some could fail to meet solvency requirements, Seiltz said.
Therefore, BaFin has started a “special survey” to have the full picture of the exposure to real estate of Institutions for Occupational Retirement Provision (IORPs), with a deadline set for the end of this month, Seiltz said.
This year, the number of Pensionkassen recording negative returns in a stress test scenario, assessing whether they are able to meet solvability requirements, and functioning as an early warning system, has increased to 18, from 15 last year, he said.
All 35 Pensionsfonds have instead passed a test assessing their capacity to withstand risks, according to BaFin.
“We see growth potential [for Pensionsfonds] in the field of pure defined contribution,” he said referring to the social partner model.
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