GERMANY - The German government is set to be the short-term beneficiary this year of plans to securitise Deutsche Post and Deutsche Telekom's liabilities to the Post-Pensionskasse, the scheme that covers ex-employees of the two part-privatised companies, together with those of Post Bank.
Under the terms of Post’s and Telekom’s privatisation agreements, two thirds of pension liabilities are covered by the state and one third by the companies. Last year the companies paid in e809m and e664m respectively.
State contributions have been projected at around e18bn between now and 2090, but the one-off increase in income from securitisation will reduce the payment it will be obliged to make for the coming year.
A spokesman for the Finance Ministry said that the decision to securitise had been reached by the Postbeamtenversorgungskasse (PBV), the legal entity that owns the Post-Pensionskasse, an association of representatives from the three companies and of pensioners, who had made the decision based on favourable market conditions.
Buyers are thought likely to include Deutsche Bank, Morgan Stanley and Goldman Sachs, together with KfW, the German state owned bank.
The initiative will help the government in its efforts to keep from breaking the EU Stability Pact’s 3% household deficit limit for a fourth time in five years. But that limit is likely to be further tested later this year by the state pension scheme.
Income for last year as a whole was below expectations, and current estimates show the scheme falling under its emergency reserves – 30% of one month’s obligations – in May. The Finance Ministry would then be forced to step in with a cash injection.
The Pensions and Lifetime Savings Association (PLSA) has announced it will shrink its board by more than one-third as part of a governance overhaul to make it "agile and more appropriate".
Smaller FTSE 350 defined benefit (DB) schemes were nearly 15 percentage points less well-funded than larger schemes in 2017, according to a Goldman Sachs Asset Management (GSAM) analysis.
The advent of collective pension systems could help the UK avoid demographic challenges which will make it "impossible" for society to help savers in retirement, experts say.