GERMANY - Heubeck AG, an actuarial and pensions advisory firm, has predicted that German companies using cash reserves to finance pension obligations will only have to raise those reserves slightly in the short term.

Currently, pension liabilities funded by cash reserves make up around 60% of the €360bn in corporate pension assets in Germany. Heubeck’s prediction is that those reserves must rise by between €2bn and €4bn.

The prediction was made on the basis of Heubeck’s new so-called “death tables”, which are the widely used in the Germany market.

Essentially, the tables enable companies to determine how long they have to pay an employee a corporate pension before death and, as a result, how much they need in reserves.

“Because we already took into account the tendency among employees to live longer when we unveiled our tables in 1998, we don’t anticipate big increases in reserves used to fund pension liabilities,” said Professor Klaus Heubeck, the firm’s chief executive, during a news conference in Cologne.

According to Professor Heubeck, the tables are used by 95% of those German companies which use cash reserves to fund pension liabilities. The tables are also relied on heavily by German pension funds serving industries and insurers which sell corporate pension products.

These clients will adopt Heubeck’s new tables from the end of this year. The key innovation is the inclusion of an employee’s birth date among other factors like age and sex.

Professor Heubeck observed that as reserve-funded pension schemes would not require much more cash in the near future, they remained a viable way of meeting pension liabilities.

“This has always been my opinion. Those that have argued the contrary – namely that an external fund must be created to fully finance pension liabilities – have seen their argument refuted by the developments on capital markets,” he said, referring to the fact that equity markets have not fully recovered from the crash of 2001-2003.

Asked about his firm’s falling out with former parent, insurance software company FJH, Professor Heubeck replied that while the idea of combining the two business was “a good one, the execution was not there from the start.”