Germany Update
SLOW BUT
STEADY
WINS THE
RACE?
AS GERMAN PLAN
SPONSORS STRUGGLE
WITH INCREASING
REGULATORY
PRESSURES, THE
PENSIONS LANDSCAPE
IS CHANGING…SLOWLY
The German Accounting Law Modernization Act, Bilanzrechts- modernisierungsgesetz (BilMoG),
passed by the German parliament on
26 March 2009, was the most extensive
reform of accounting law in Germany
since the German Accounting Directives Act of 1985.
The new law, the result of many years’
discussion of harmonisation with international principles of financial reporting,
was designed to give German companies
a more cost-effective and simple alternative to the wide-ranging and complex
International Financial Reporting Standards (IFRS).
inflation and pay rises.”
plans, as large German plan sponsors
have typically already been using inter-
national accounting rules.
The guidelines were to be applied for
the first time for the fiscal year 2010;
however, many plan sponsors are still
struggling to come to terms with the
increased liabilities that BilMoG has
brought to their balance sheets.
“Liabilities for plan sponsors have been
underestimated for the last 20 to 30
years,” says Martin Katheder, CEO of
Allianz Pension Partners and Head of
Allianz GI’s German pension business.
“BilMoG is a big issue for our plan spon-
sors, as now plans have to be accounted
for more realistically. Previously spon-
sors did not have to take into account
Caterina Dattolo, Head of Relation-
ship Management, Pensions and Corpo-
rates, at BNY Mellon Asset Servicing
Germany, agrees: “For plan sponsors,
these accounting changes primarily
affect the way pension liabilities are
accounted for, and especially the evalu-
ation of the accruals. The liabilities must
be valued more realistically, ie must
be discounted at a market rate for the
respective maturities. Overall, in most
cases, these changes lead to an increase
in pension accruals.”
However, Dr. Klaus Mössle, Head of
Institutional Business at Fidelity Interna-
tional in Germany, warns that it is still
too early to predict the true effects: “As
companies also have not used a uniform
approach under German GAAP before
BilMoG, it is too early to predict the
overall outcome under the new rules.
German actuaries assume that pension
liabilities under BilMoG will increase in
most cases.”
Katheder also notes that BilMoG has
only raised major concerns for plan
sponsors with small to medium size
It is not only the BilMoG regulations
that are causing issues for plan sponsors.
