The German financial supervisory authority BaFin has ended its intensified supervision of Pensionskassen as funding and solvency positions have improved.
Higher interest rates have strengthened the financial position of Pensionskassen, one of the vehicles used to provide occupational pensions, to the extent that BaFin “no longer sees a need for intensified supervision in its previous form”, a spokesperson for the supervisory authority told IPE.
BaFin introduced intensified supervision during the prolonged period of low interest rates, which placed sustained pressure on pension funds’ balance sheets.
Last year, around 20 Pensionskassen remained under intensified supervision, which included quarterly reporting on their financial position and close engagement with the regulator.
In 2025, only 10 of Germany’s 115 Pensionskassen failed BaFin’s annual stress tests covering equity, fixed income, real estate and credit risks.
“The results published by BaFin are a strong indicator that the solvency situation of the supervised Pensionskassen has improved significantly,” said Rafael Krönung, chief executive officer, human capital, at Aon Germany.
Higher interest rates have enabled Pensionskassen to generate sufficient returns again through fixed income investments while reducing portfolio risks and hedging against future interest rate fluctuations, Krönung added.
Interest rates, a more stable capital market environment and measures to strengthen own funds and adjust investment strategy have all contributed to improved solvency and funding ratios at Pensionskasse Deutscher Genossenschaften, according to chair Nicole Möbs.
The reduction of portfolio risks has also supported the fund’s financial position, she said, adding that the improvements have significant implications for the pension fund’s financial security and long-term ability to meet its liabilities.
The pension fund is also actively shaping its business strategy and investing in emerging digital trends, she said.
Risks remain
Despite the overall improvement in financial conditions, Pensionskassen continue to face short-term challenges, with rising interest rates reducing the market value of some investments, according to Aon’s Krönung.
BaFin said pension funds also continue to face significant challenges relating to solvency requirements, governance and investment management.
The regulator, therefore, continues to closely monitor Pensionskassen that are unable to demonstrate adequate coverage of solvency capital requirements, either currently or in the foreseeable future. It is also paying particular attention to funds with significant allocations to alternative assets.
Many Pensionskassen increased allocations to alternative investments such as private debt and private equity during the low-interest-rate environment in search of higher returns.
“We expect that the pension funds understand these [alternative] investments well, that they have adequate staffing in risk management, with know-how to invest in the asset classes,” the BaFin spokesperson said.
Credit default risks are increasing in the current economic environment, while liquidity management remains critical, particularly during periods of market volatility.
It is therefore crucial that Pensionskassen have robust liquidity risk management, and sufficient funds or assets to convert into liquidity in the short to medium term, the spokesperson added.
