At the end of last year German Pensionskasse asset allocation was still resolutely directed towards fixed interest, with 35% in Schuldscheine and similar assets and 17% in more traditional fixed interest, according to figures disclosed to the recent aba pensions conference in Germany. While equities were a mere 1.1%, the investment fund category now accounts for 35% of all assets, the bulk of which will be Spezialfond investment containing a substantial proportion of equities. This has been estimated to be around 20% of all PK assets. Real estate made up 5.2% and mortgages 2.0%.
The figures as at the end of 1999, the latest year for which there are official figures, show the Schuldschein category just over 34% and other fixed income at 20%. Directly held equities were 1.4%, while investments through funds amounted to just over 32%. Real estate made up 5.5% and mortgages 4.1% of assets.
The total assets in book value terms of the 141 funds covered in the latest figures for 1999 from the insurance surpervisory office in Bonn, the BAV came to DM127bn (e64bn), having risen over the year by 5.8% from DM120bn.
Altogether, the number of active members covered by these arrangements fell from2.41m at end of 1998 to 2.38m, while the number of pensioners and those covered by incapacity rose 894,000 from 861,000 at the end of 1998. This reflects the lack of interest in setting up new PKs due to their tax disadvantages.
The current returns obtained by the PKs on their assets averaged 6.6% in 1999. But care must be taken with this figure as it is calculated on the book value of investments, but it is also to a degree at the discretion of the PK as to how much of the hidden reserves, it decides to realise and take into the accounts of the fund.
The PKs do not have to disclose their ‘hidden reserves’, that is the extent to which market values exceed book values, even though they are regulated as insurance companies, which have been obliged to disclose these their accounts since 1998. The BAV’s annual report on the industry for 1999, shows the overall hidden reserves of the industry, apart from PKs, as 18.2% on total assets assets at book value of DM1,325bn, with, 105% differential between book and market value for equities, 62% for real estate and 33% for investment funds. For the life insurance sector, which would contain substantial assets for pensions provision, as direct insurance is one of the four main methods of pension saving in second pillar provision, the total assets have a book value of DM1,010bn and hidden reserves amounted to 14.4% of this. BAV figures show the annual returns on assets steadily declining from 7.3% in 1996, 7.2% in 1997, 7.0% in 1998 and 6.8% in 1999.

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