GERMANY - A €345m multi-employer pension fund run by German insurer AMB Generali saw new business decline sharply in 2006 because of the loss of its privileged tax position above another form of pensions vehicle.

AMB Generali Pensionskasse said, in its business report for 2006, new business totalled €11.8m in 2006 - down 82% from 2005.

"Business in 2006 was again held down by the government's decision in early 2005 to provide equal tax treatment to Pensionskassen and Direktversicherungen. That has caused more new business to flow to Direktversicherungen." the fund remarked.

Pensionskassen are traditional German pension funds which offer a minimum guarantee on paid-in savings - currently 2.25%. Direktversicherungen also offer a guarantee, but as direct insurance contracts they are less costly to operate than Pensionskassen.

However, the decline in new business at AMB Generali Pensionskasse exceeded the 35% average for other Pensionskassen.

On a positive note, the scheme said it had earned €8.7m on its assets last year, up from €3.9m the previous year. Its net return, however, was unchanged at 3.4%.

Returns from German Pensionskassen have lagged well behind those of other European schemes because of their great exposure to fixed income, up to 90% of assets in some cases - a strategy adopted to provide a guaranteed return as well as meet investment allocation restrictions imposed by German financial services regulator BaFin.

In terms of the asset allocation at AMB Generali Pensionskasse, the scheme said it had 87% of assets in fixed income, including Pfandbriefe, or German covered bonds. Another 8.1% was held in liquidity, while just 4% was allocated to equities.

Elsewhere, VIFA Pensionsfonds said in its 2006 business report its assets increased nearly three-fold in 2006 to €22m. Pensionsfonds were launched in 2002 as Germany's answer to the equity-oriented Anglo-Saxon pension fund but, after a slow start, have begun to take off.

Despite another good year for equities, VIFA Pensionsfonds said its net return for 2006 was 9.3%, down from 14.9% in 2005.

Finally, WWK Pensionsfonds, a multi-employer vehicle run by German life insurer WWK, said it earned €127,000 on its assets in 2006, down from €179,000 in 2005.

Unlike other German Pensionsfonds, the WWK vehicle had significant exposure to fixed income, with the asset class accounting for 96% of its €3.6m in assets.