The pension assets of companies listed in the DAX index have decreased by €60bn to €240bn in 2022, as a result of losses on almost all assets classes, according to Mercer.
On equity markets, the MSCI World TR index fell by up to 12.3%, the MSCI Emerging Markets TR index by up 14.5% and MSCI Europe TR index by 8.9 %. High inflation and monetary policy led to losses of 13.3% on bonds.
The significant increase of the discount rate, resulting from central banks hiking interest rates to fight inflation, meant however that the value of pension obligations on the balance sheets of DAX companies have also dropped significantly, by close to €120bn to €290bn, according to International Financial Reporting Standards.
The funding ratios, which were already at a high level (72%), have risen to a new high of over 80% as a consequence of lower pension obligations.
Jeffrey Dissmann, head of investment consulting at Mercer Germany, said: “Due to higher interest rates and the associated high level of funding, it is currently time to invest again in interest-bearing asset classes. With a liability-driven investment (LDI) approach you can hedge the high interest rate sensitivity of the obligations, reducing balance sheet volatility.”
WTW Switzerland snatches up GiTeC
WTW Switzerland has acquired GiTeC, a company active in actuarial valuation and consulting services for pension funds and insurance companies, it announced today.
WTW in Lausanne will integrate the team of six pension fund experts and actuaries at GiTeC to provide pension and strategic consulting, and actuarial services.
Stephan Wildner, head of WTW Switzerland, said: “The merger with GiTeC supports our long-term strategy, and we are confident of the benefits this merger will bring to WTW and GiTeC clients and colleagues.”
Guillaume Hodouin, head of WTW Lausanne, added: “Together, we aim to deliver more robust and sustainable solutions to serve the diverse and evolving needs of clients.”
Swiss parliamentary committee consults on second pillar reform
The social security and health committee (SGK-N) of the National Council, the lower house of the Swiss parliament, has started to consult on different ideas to reform the country’s second pillar pension system.
The Council of States, the upper house of the parliament, favours compensation for the reduction of the conversion rate used to calculate pension payouts, a measure part of the overall second pillar reform, for 15 cohorts caught in the transition to the new system.
The 15 cohorts who retire after the reform comes into force will receive a lifelong pension supplement as compensation for the reduction of pension payouts, according to the concept put forward by the Council of States.
The National Council, the lower house of the Swiss parliament, has instead voted in favour of compensation amounting to CHF2,400 a year for the first cohort, CHF1,800 a year for the second cohort and CHF1,200 per year for the third cohort.
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