More than 35% of medium-sized companies in Germany surveyed by Towers Watson are thinking to close their pension plans due to the current market environment.

The consultancy warned, however, that many them were still unaware of exactly what effect the low interest rate had had on their balance sheets.

It also acknowledged that the issue was a “sensitive” one, as most medium-sized companies in Germany aim to finance their pension liabilities from their revenues.

The consultancy found that nearly 60% of companies lacked any buffers for their pension liabilities, and that just 20% were thinking to rectify this.

Further, only one-quarter of respondents had a “comfortable” funding level of more than 75%.

The discount rate applied by German companies, after seven years of low interest rates, is set to fall even further, which will, in turn, increase liabilities.

The rate is currently derived by using rates over a seven year-period, which means the last year with a relatively high rate – 2008 – will be removed from the calculation.

Amendments to this rule under German accounting standard HGB – applied mainly by small and medium-sized enterprises – are currently being discussed.

According to the Towers Watson survey from September, covering 146 medium-sized companies, more than half of the participants are mulling changes to their pension plans.

Forty-seven percent are thinking to make changes on the “liabilities side”, while 37% are mulling full closure.

This, according to Haiko Gradehandt, head of medium-sized enterprises at Towers Watson in Frankfurt, would be a “dramatic signal” for occupational pensions in Germany.