Pension assets of companies listed on the German DAX index increased by €12bn year-on-year in 2023 to 257bn, according to the latest figures published by Mercer.
Last year’s pension assets recovery was however not enough to fully compensate DAX companies for the losses made in 2022, and it is far from the peak of €300bn recorded in 2021, the consultancy said.
The amount of pension assets of DAX companies has barely changed, up only by €2bn, after Commerzbank and Rheinmetall replaced Linde and Fresenius in the index. As expected, pension payments from plan assets were higher than new contributions, resulting in net outflows of €5bn, according to Mercer.
Return on pension assets stood at over €15bn, or around 6%, in 2023, taking into account the changed composition of the index and cash outflows from plan assets, below the value expected in January based solely on market data.
With interest rates still high, pension investors should “carefully review and readjust” their asset allocations without sacrificing returns, said Jeffrey Dissmann, head of investments at Mercer Germany.
The value of pension obligations went up by around €16bn to €323bn, primarily as a result of the discount rate.
“DAX companies had to significantly reduce the discount rate for discounting pension obligations compared to the previous year. The extent [of the reduction] varied, and was depended on the method to determine the interest rate chosen and the portfolio composition, but overall led to a significant increase in the values of [pension] obligations in balance sheets There were also effects from high inflation,” said Thomas Hagemann, chief actuary at Mercer Germany.
The average funding ratio of DAX schemes declined slightly to 79%, from a record high of 80% at the end of 2022, Mercer said.
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