German financial supervisory authority BaFin has shut down the Pensionskasse for tax consultants, it was announced on Friday.
The Pensionskasse was unable to meet the minimum capital requirement and submitted a financing plan to get rid of the underfunding that BaFin considered inadequate, the regulator said in a statement explaining its decision.
The decision to revoke the licence to operate from the Deutsche Steuerberater-Versicherung – Pensionskasse des steuerberatenden Berufs VVaG, as it is officially called, became effective at the end of 31 December, according with section 234f paragraph 4 sentence 2 of the Insurance Supervision Act (VAG).
The Pensionskasse is now formally phasing-out operations, it said, adding that the recent developments do not have an impact on the members of the pension fund or on existing contracts.
According to §304 paragraph 5 of the VAG, the Pensionksasse is not allowed to conclude any new contracts or to extend existing contracts following the BaFIn’s decision.
The regulator had already decised to revoked the fund’s license to operate in February 2020, but the decision did not become final because the Pensionskasse initially objected it and later filed a lawsuit.
The management board of the pension fund has now decided not to pursue the lawsuit against BaFIn’s decision.
A long story
The Pensionskassen has been closed to new members since October 2018. It recorded a deficit of around €158m that same year due to a significant increase in actuarial reserves necessary to fend off the consequences of a persistent period of low interest rates and to secure entitlements of members in the long-term, which lead to the pension fund using up all of its own funds.
The scheme had therefore designed a restructuring plan aiming to cover the shortfall by cutting benefits paid to members, as the Pensionskasse could not rely on a sponsoring company that could compensate for a shortfall with additional capital.
BaFin’s executive director Frank Grund recently warned that Pensionskassen in Germany could face further cuts to pension benefits in the next few years if sponsoring companies decide not to grant financial funding.
As a result of the scheme’s restructuring plan, the maximum guaranteed interest rate was reduced to 2.25%.The restructuring plan was completely independent from its financing plan, the Pensionskasse said.
While the financing plan was intended to restore the minimum capital requirement, the restructuring plan’s goal was to exclusively cover the deficit.
If the financing plan is rejected and the Pensionskasse’s license to operate is revoked, the restructuring plan remains necessary to meet its obligations to pay member benefits, it added at the time of warning financial markets about the possible revocation of the business license in 2019.
This regulatory requirement remains in place even after the business license has been revoked.