There has been a drop in pensions obligations amongst German stock corporations, analysis from German consulting giant Aon has revealed.

The firm’s report, which translates roughly as DAX Annual Report Analysis, showed that the 40 largest corporations in Germany have seen their pensions obligations fall from €332bn to €325bn in the past financial year.

The firm said that a shift in the makeup of the DAX along with a shift in valuation assumptions has led to the change.

Aon Wealth Solutions Germany, senior consultant, Christoph Tellmann, said in a statement: "Companies must make sufficient provisions for the pension promises to their employees.

"In order to determine an appropriate value, valuation assumptions must be made, for example on the actuarial interest rate, mortality or the development of salaries and pensions.

“Interest rates have risen slightly compared to the previous year, and salary and pension trends are in some cases below the corresponding previous year's assumptions due to lower inflation. Together, this enables DAX companies to show slightly lower pension obligations in their annual financial statements."

Aon also said that the coverage assets of the DAX companies also developed positively.

These are when a company forms a cover asset specially reserved for this purpose, which is made up of a mix of government and corporate bonds, shares, insurance, real estate, and other investments that is tailored to the respective structure of the pension obligations.

In the past financial year, said Aon, the coverage assets of all DAX companies increased by around 3 per cent to €264bn.

Overall, the degree of financing of pension obligations is 81 per cent, which is higher than in the previous year (78 per cent). For DAX companies, however, the degree of funding varies considerably, ranging from 0 per cent to fully funded pension obligations.

The firm also found that pension entitlements for employees increased by €6bn in 2024, with DAX companies contributing cover assets to the same extent. In addition, it said that sustainability criteria continue to play an important role.

Aon partner, Angelika Brandl, added: "DAX companies continue to take advantage of the opportunities offered by the capital markets to finance their pension commitments.

"The additional endowments to the coverage assets demonstrate the continuing importance of company pension schemes, especially with a focus on adequate capital coverage.

"With the funding ratio of 81 per cent on average, which has increased compared to the previous year, the DAX companies continue to be in a very solid position."

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