25. February 2020

Special competence: Outsourcing

The direct commitment represents the most important means of implementing occupational pension schemes. Its advantages include, in particular, its high financial efficiency and great flexibility. Despite these undisputed advantages, more and more companies are considering outsourcing pension provisions from their balance sheets. In addition to purely economic considerations, soft facts also have a considerable influence.

In addition to the argument of an intended company sale, the main motive for outsourcing direct pension commitments is accounting policy considerations, in particular the improvement of the equity ratio and other balance sheet ratios. This is intended to achieve an improved rating. The companies are in competition with competitors, in particular from the Anglo-Saxon region, where corporate financing with the help of pension provisions is completely unusual.

In addition to the improvement of the balance sheet picture, the financing effects are the reason for outsourcing considerations. Although the creation of pension provisions is financially highly efficient due to the associated internal financing effect, the provision of benefits in the form of pension payments from company funds leads to problems in the area of liquidity planning for a large number of companies. In addition, the pension obligation causes a debt jump (balance sheet jump risk) in the event of an unforeseen occurrence of risk, resulting in an undesirable deterioration of the balance sheet ratios.

For financing reasons, it is decisive whether the achievable return on the pension assets roughly corresponds to the discount rate on the liabilities side of the balance sheet for the pension provision. For tax purposes, the calculation of the pension provision is based on an annual interest rate of 6 %.  Under commercial law, the average market interest rate is to be used for the calculation with an assumed remaining term of 15 years (interest rate in accordance with the relevant provisions discounting ordinance (RückAbzinsV). This interest rate is generally enormously lower than the aforementioned tax counterpart of 6 %.

In this context, Kenston Pension GmbH is your partner and service provider for all questions concerning the outsourcing of company pension obligations. In addition to the corresponding consulting support, we also administer and administer specially established pension companies for the direct assumption of pension obligations. Talk to us!

On the following pages you will find further information on the outsourcing of pension obligations.