German buy-out solutions ‘increasingly important’ due to strong funding

Written by Natalie Tuck

28/03/2025

Pension buy-out solutions are becoming “increasingly important” in the German pensions market because of the high-level funding ratios, according to WTW head of general consulting, Dr Johannes Heiniz.

WTW’s latest analysis, DAX-Pensionswerke 2024, of DAX companies’ pension funds found that in 2024, the funding ratio of schemes was 82%, the highest level over the past 10 years. Assets increased to €262m in 2024, according to WTW analysis, while pension liabilities decreased to €320bn, leading to a 3% increase in the funding ratio.

The study is based on 31 analysed annual reports of the 40 DAX companies. Commenting on the strong performance, WTW head of retirement Germany, Hanne Borst, said that equity markets in particular achieved high returns in light of a robust US economy.

“We expect higher volatility in the actuarial interest rate and capital market in 2025. In our view, however, there is no cause for concern: DAX companies are actively managing their pension obligations and can therefore react to current developments."

Therefore, Heiniz believes that pension schemes are “well positioned” for de-risking.

“Agility and a willingness to change are important characteristics for a future-proof organisation. In view of the high level of funding, pension buy-out solutions are becoming increasingly important. In addition to the well-known options for de-risking, such as CTAs and pension funds, pension buy-outs are another attractive option for companies to position themselves in an agile and future-proof manner,” he said.

Expanding on this, Heiniz said buy-out solutions are becoming increasingly important to help businesses focus on their core business.

“The high level of funding provides an additional incentive for pension buy-out solutions. Companies can only use the funds that have been set aside to finance pension liabilities. Therefore, now is a good time to start planning towards this goal,” he said.

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