WTW will establish a pension corporation (Rentnergesellschaft) as “the shell” to transfer pension obligations and offer clients a pension buyout solution, it announced today.
A spokesperson for the consulting firm told IPE: “Our solution includes everything required for a transfer of pension obligations in Germany.”
The implementation under corporate law of a so-called external risk carrier is already underway, and WTW expects to complete it by June 2025.
Pension obligations are a burden on the balance sheets of companies that are changing their business models and need more “flexible and agile” corporate structures, WTW said in a statement.
German companies are looking for solutions to offload obligations as they have to deal with company pension schemes for ageing members in-house. The current capital market and interest rate is a tailwind for de-risking plans.
“The level of funding [ratios] for company pension schemes is at an all-time high. This makes it easier to implement restructuring through pension buyout solutions,” said Johannes Heiniz, senior director, retirement, at WTW.
Hanne Borst, head of retirement at WTW, added: “With investment, or insurance-based investment options, we offer attractive solutions for small and medium-sized, and large DAX companies. This is how we round off our de-risking portfolio for our customers.”
WTW is making inroads into the pension buyout market in Germany alongside firms such as VEDRA Pensions, Deutsche Betriebsrenten Holding (DBR) and Allianz Global Investors (AllianzGI), which set up a strategic partnership for pension risk transfers through pension corporations, and pension risk boutique Funding Solutions Deutschland.
“With decades of experience and expertise in the areas of pension de-risking, capital investments, actuarial work, M&A and administration of pension obligations, we are ideally positioned to actively shape the German pension buyout market as the first full-service provider on the market, [and] with innovative approaches,” Borst added.
Pension buyout deals in Germany are struggling to take off – a similar scenario also seen in the Netherlands – but the market is worth potentially €600bn, according to Thomas Huth, partner at consultancy Lurse.
Lurse expects that foreign players, especially from the US and the UK, will enter the pension buyout market in Germany, where companies consider de-risking pension obligations but are afraid of reputational risks, Huth added during a pension asset management roundtable organised by the firm in Frankfurt.
The latest digital edition of IPE’s magazine is now available
No comments yet