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14 February 2017

Investment & Pensions Europe: German finance groups outsource record level of pension liabilities

German financial services companies transferred a record volume of pension liabilities from their balance sheet to BVV, the pension fund for the sector, in 2016.

In total BVV collected more than €100m in one-off payments from employers running book reserve pension schemes, known as Direktzusagen. Through this model, companies make annual pension payments directly from their balance sheets rather than holding assets and liabilities in a segregated entity.

The €26bn industry pension fund said this confirmed the trend for companies to outsource pension liabilities to external providers rather than keep them on their balance sheet.

The transfer of liabilities happens by way of companies making one-off payments to BVV, which then takes on the pension obligations.

Mirko Buchwald, head of pensions management and products at BVV, said that the record volume in 2016 was not due to any single event or development that happened during the year. Instead he said it was the reflection of a time-lag: companies, having been preoccupied with the repercussions of the financial crisis for several years, were now concentrating on core competencies and optimising their pension system as part of this.

The low-yield environment, operational considerations, and strategic aspects were combining to prompt more and more companies to question the value of running Direktzusage schemes, said Buchwald.

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© IPE International Publishers Ltd.

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