The assets of German DAX 40 pension schemes reached €257bn in 2023, Mercer Germany has revealed.

Analysis published by Mercer shows that pension assets of DAX 40-listed companies increased by 5 per cent (€8bn) over the year from €245bn to €257bn. However, due to a decrease in the actuarial interest rate in 2023, pension obligations in the DAX 40 also increased significantly – also by 5 per cent, from €307bn to €323bn.

The coverage ratio of pension obligations, which reached a record level of 80 per cent in the previous year, remained fairly stable at 79 per cent at the end of 2023.

Mercer's findings, which are based on the annual reports of DAX 40 companies published up to 15 March 2024, illustrate the influence of capital market developments on the valuation of pension obligations. However, the analysis of the DAX companies' annual reports also shows that funding solutions continue to be interesting as a de-risking measure.

"Many investors took advantage of the higher interest rates at the beginning of 2023 to expand the interest rate hedging of their obligations," Mercer Germany head of investments, Jeffrey Dissmann, said.

"Together with the brilliant year-end rally, this generated a high, mostly double-digit return in many plan assets. However, this was not always enough to cover the increased need for adjustments to cover inflation."

"With funding solutions, companies can counter liquidity burdens and risks. The interest expenses in the consolidated financial statements, which have risen recently, can be reduced again thanks to the resulting pension assets. With their high level of funding, DAX companies are clearly demonstrating the importance of such measures," Mercer Germany head of pension fund consulting, Dr. André Geilenkothen, explained.

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