How independent of demographic trends are company pensions?

The crisis in the pay-as-you-go financing of social security, in particular old-age protection, has lent weight to demands for a transformation to a funded system. Such a system is regarded as less sensitive to demographic changes, as a rule. However, even funded systems, such as company pension schemes that are indirectly financed by pension accruals or directly via fund assets are exposed to risks that stem from demographic changes. Prof. Jochen Zimmermann, University of Bremen, discusses the effects that this can have on future enterprise performance under the economic criteria of profits and liquidity. He sees the problem of company pension schemes in the lack of a collective equilibrium mechanism. This would enable life insurance companies and private pension insurers to shape the system flexibly in terms of minimum guarantees and surplus bonuses. This is not possible, however, within the framework of the fixed entitlements of company pension schemes. Here enterprises must revert to (fixed) assets and make adjustments in their economic performance that weakens their earning power. The currently prevailing direct entitlement does not make it possible for enterprises to revert to globalised capital markets in which demography effects are weak or non-existent. For this reason many German companies will have considerable demographic problems with their pension schemes.