- VEDRA Pensions and management consultancy zeb analyze the impact of pension liabilities on banks and insurance companies, offering strategic options for future management.
- Increased flexibility through lower pension liabilities due to recent interest rate cuts.
Monheim am Rhein, August 28, 2024
VEDRA Pensions ("VEDRA"), a pioneer in Germany for the buy-out of defined benefit pension obligations, in collaboration with zeb, a management consultancy specializing in banks and insurance companies, has conducted a study on the current management of pension obligations within the financial sector.
The study focuses on pension buy-outs, which involve the complete transfer of pension obligations off the balance sheet, providing a comprehensive solution for managing these liabilities. This approach, widely adopted in the Anglo-Saxon world, is gaining traction in Germany.
Dirk Holländer, Senior Partner at zeb, explains the growing relevance of pension obligation transfers: "The macroeconomic shifts and interest rate changes since 2022 have deeply impacted the German economy. These market fluctuations also affect pension obligations, a significant balance sheet item for many companies." Tilo Kaus, Managing Director of VEDRA Pensions, adds, "While rising interest rates have reduced some balance sheet liabilities, the risk of higher future cash flows is increasingly concerning decision-makers, especially with the current inflation trends."
The study highlights that the risk capacity and capital adequacy of financial institutions, such as banks, savings banks, and insurers, are influenced by the size of their pension obligations. The joint analysis offers recommendations across three key decision areas:
1. Strategic alternatives for managing pension liabilities.
2. The impact of pension buy-outs on financial ratios.
3. Qualitative benefits of pursuing a pension buy-out.
In Germany, pension buy-outs have so far played a minor role, but they are often the most consistent and straightforward option for active pension management, aligning more closely with many companies' goals than interim solutions. The study demonstrates that banks and insurance companies can enhance their capital and solvency ratios, as well as improve their balance sheets and income statements, by opting for a pension buy-out, ultimately making their institutions more resilient.
To request a german pdf-copy of the study here: Landingpage Studie – Vedra Pensions (vedra-group.com)
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About VEDRA Pensions
VEDRA Pensions is a German holding company specialising in innovative and pragmatic solutions related to pension liabilities ("pension buy-outs"). Since its origins in 2016, VEDRA has already pioneered the German market in relieving companies from the four risks associated with pension liabilities: Inflation, Longevity, Interest Rate and Market Risks. Which means a legally and economically exempting transfer of the risks associated with the pension liability. The VEDRA model offers a solid and legally secure solution through an adequate initial funding. For the pensioners concerned, this in turn means the advantage of full funding of the obligations. Currently, VEDRA is already looking after several thousand claimants.
About zeb:
Founded in 1992, the zeb group is one of the leading strategy, IT and management consultancies for the financial services sector in Europe. More than 1,200 employees at 15 international locations offer customized and flexible consulting expertise along the entire value chain of financial service providers - from strategy, restructuring and sales to corporate management, human capital and IT. zeb's clients include national and international banks, private banks, savings banks, cooperative banks, insurance companies and financial intermediaries of all kinds. zeb has been named "Best Consultant" in industry rankings on several occasions.
For more information, please visit the website: Strategy and management consulting | zeb Consulting (zeb-consulting.com)
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