Paradoxical pension burdens

After the pension burdens had risen steadily in recent years, the capital market turbulence in the wake of the corona crisis should provide significant relief.

The pension liabilities of large German companies reached new record levels at the end of the 2019 financial year. The DAX-30 companies reported pension liabilities totaling 415 billion euros. The pension deficits have reached their previous highs from 2016 and now stand at EUR 138 billion. However, the deficits are likely to have narrowed in the first quarter of 2020. What initially sounds paradoxical in view of the capital market turbulence is a result of the valuation logic. Large corporations are benefiting from rising bond market yields and the fact that the funding ratio of their plans is only about two-thirds.

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