The direct commitment is the most important way of implementing a company pension plan. The main advantages are the high level of financial efficiency and the high degree of flexibility. Despite these undisputed advantages, more and more companies are considering removing pension provisions from their balance sheets. In addition to purely economic considerations, “soft facts” also have a considerable influence.
The main motive for outsourcing direct pension commitments, apart from the argument of an intended sale of the company, is balance sheet policy, in particular the improvement of the equity ratio and other balance sheet ratios. The aim is to achieve an improved rating. The companies are in competition with competitors, particularly from Anglo-Saxon countries, where corporate financing with the help of pension provisions is completely unusual.
In addition to improving the balance sheet, the financing effects are the reason for outsourcing considerations. Although the formation of pension accruals is highly efficient in financial terms due to the associated internal financing effect, for a large number of companies the provision of benefits in the form of pension payments from company funds leads to problems in the area of liquidity planning. In addition, in the event of an unforeseen occurrence of risk, the pension obligation causes a jump in debt (balance sheet jump risk) and, as a result, there is an undesirable deterioration in the balance sheet ratios.
For financing reasons, the decisive factor is whether the achievable return on plan assets is roughly equivalent to the discount rate on the liabilities side of the balance sheet for the pension provision.
In this context, Kenston Pension GmbH is your partner and service provider for all issues relating to the outsourcing of direct company pension obligations. In addition to the corresponding consulting support, we also administer and manage, together with our partner companies within the KENSTON GROUP®, specially established pension companies (“pensioner companies”) for the direct assumption of pension obligations. Contact us!