Occupational pension schemes in Germany

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1 Economy Peter Schulz Occupational pension schemes in Germany Changes in the German landscape of old-age plans, cta model Master's Thesis

2 Bibliographic information published by the German National Library: The German National Library lists this publication in the National Bibliography; detailed bibliographic data are available on the Internet at This book is copyright material and must not be copied, reproduced, transferred, distributed, leased, licensed or publicly performed or used in any way except as specifically permitted in writing by the publishers, as allowed under the terms and conditions under which it was purchased or as strictly permitted by applicable copyright law. Any unauthorized distribution or use of this text may be a direct infringement of the author s and publisher s rights and those responsible may be liable in law accordingly. Copyright 2007 Diplomica Verlag GmbH ISBN:

3 Peter Schulz Occupational pension schemes in Germany Changes in the German landscape of old-age plans, cta model Diplom.de

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5 MA-Thesis / Master ISBN: Peter Schulz Occupational pension schemes in Germany Changes in the German landscape of old-age plans, cta model Diplom.de

6 Peter Schulz Occupational pension schemes in Germany Changes in the German landscape of old-age plans, cta model ISBN: Druck Diplomica Verlag GmbH, Hamburg, 2007 Zugl. University of East London, London, Großbritannien, MA-Thesis / Master, 2007 Dieses Werk ist urheberrechtlich geschützt. Die dadurch begründeten Rechte, insbesondere die der Übersetzung, des Nachdrucks, des Vortrags, der Entnahme von Abbildungen und Tabellen, der Funksendung, der Mikroverfilmung oder der Vervielfältigung auf anderen Wegen und der Speicherung in Datenverarbeitungsanlagen, bleiben, auch bei nur auszugsweiser Verwertung, vorbehalten. Eine Vervielfältigung dieses Werkes oder von Teilen dieses Werkes ist auch im Einzelfall nur in den Grenzen der gesetzlichen Bestimmungen des Urheberrechtsgesetzes der Bundesrepublik Deutschland in der jeweils geltenden Fassung zulässig. Sie ist grundsätzlich vergütungspflichtig. Zuwiderhandlungen unterliegen den Strafbestimmungen des Urheberrechtes. Die Wiedergabe von Gebrauchsnamen, Handelsnamen, Warenbezeichnungen usw. in diesem Werk berechtigt auch ohne besondere Kennzeichnung nicht zu der Annahme, dass solche Namen im Sinne der Warenzeichen- und Markenschutz-Gesetzgebung als frei zu betrachten wären und daher von jedermann benutzt werden dürften. Die Informationen in diesem Werk wurden mit Sorgfalt erarbeitet. Dennoch können Fehler nicht vollständig ausgeschlossen werden, und die Diplomarbeiten Agentur, die Autoren oder Übersetzer übernehmen keine juristische Verantwortung oder irgendeine Haftung für evtl. verbliebene fehlerhafte Angaben und deren Folgen. Diplomica Verlag GmbH Hamburg 2007 Printed in Germany

7 Table of Contents TABLE OF CONTENTS LIST OF FIGURES ACKNOWLEDGEMENTS I III V 1 INTRODUCTION Rationale Approach 2 2 NATIONAL AND OCCUPATIONAL RETIREMENT SYSTEMS National Retirement Systems based on the Example of Switzerland, USA and Germany Switzerland USA Germany The Treatment of Occupational Pension Schemes in Germany: Five Investment Vehicles Direct Pension Promise/Book Reserve (Direktzusage) Benefit/Support Fund (Unterstützungskasse) Direct Insurance (Direktversicherung) Staff Pension Insurance (Pensionskasse) Pension Fund (Pensionsfond) The Impact of Pension Liabilities on the Financial Statement of a Company FAS 87 vs. IAS 19 vs. HGB Basel II 27 3 SUMMARY: NATIONAL/OCCUPATIONAL RETIREMENT SYSTEMS 29 4 INFICON AND ITS PENSION SYSTEMS Introducing INFICON INFICON GmbH s Business Issues Impact On Financial Performance/Balance Sheet Occupational Pension Schemes for INFICON s German Subsidary: Overview of the Advantages and Disadvantages Direct Pension Promise / Book Reserve (Direktzusage) Benefit/Support Fund (Unterstützungskasse) Direct Insurance (Direktversicherung) Staff Pension Insurance (Pensionskasse) Pension Fund (Pensionsfond) 48 i

8 4.5 Occupational Pension Schemes and the Impact on INFICON/Matrix 49 5 ASSUMPTION/MANAGEMENT RECOMMENDATION Outsourcing of Pension Liabilities Compensation of Pension Obligations Transfer to a Staff Pension Insurance or to a Direct Insurance Transfer to a Pension Fund Transfer to a Contractual Trust Arrangement (CTA) Assumption 56 6 ANNEX Introduction - Survey: best practice in German companies Realisation - Survey: best practice in German companies Outcome - Survey: best practice in German companies Summary - Survey: best practice in German companies 72 BIBLIOGRAPHY 73 LIST OF ABBREVIATIONS 77 ii

9 List of Figures Figure 2-1: The three pillar system 5 Figure 2-2: Comparing DB and DC Plans 9 Figure 2-3: Fragmentation of the five German investment vehicles, status Figure 4-1: Balance Sheet Impacts, INFICON GmbH, Köln 40 Figure 6-1: Questionnaire Occupational Pension Schemes English 60 Figure 6-2: Questionnaire Occupational Pension Schemes German 61 Figure 6-3 Survey Sample, DAX 30 Companies 62 Figure 6-4 Survey Sample, Others Companies 63 Figure 6-5: Number of companies that provide an occupational pension scheme 65 Figure 6-6: Number of companies that outsourced their pension liabilities to an external legal entity or have dealt with that issue 66 Figure 6-7: Number of companies that do not see the necessity to deal with the issue of outsourcing 67 Figure 6-8: Expected advantages of outsourcing 68 Figure 6-9: Confirmed benefits of outsourcing 68 Figure 6-10: Preferred financial vehicles for outsourcing 70 Figure 6-11: Expected advantages of outsourcing; companies with a CTA solution 71 Figure 6-12: Confirmed benefits of outsourcing; companies with a CTA solution 71 iii