Trusts
German companies use defined benefit plans to meet more than 50 per cent of their company pension requirements. As pension obligations are debt and as pension commitments rise, a company’s equity capital ratio falls. If no ring-fenced assets are available, companies have to meet future commitments out of cashflow, which could affect their ratings and increase their costs of finance.
In recent years, some companies have opted to show assets (plan assets) on the assets side to balance their pension commitments on the liabilities side of their balance-sheets, make those assets over to outside trustees and grant their eligible employees rights of access to the assets on trust should they become insolvent (Contractual Trust Arrangement / CTA).
With such trust models, international accounting rules (IFRS, US-GAAP) allow the pension obligations on the liabilities side to be netted against the assets ring-fenced for pension purposes on the assets side of balance-sheets. This compresses balance-sheets and improves key indicators such as equity ratios and gearing. Financing out pension obligations also avoids encumbering income and expenditure accounts and cashflows in the future.
To make such constructions available to small and medium-sized enterprises (SMEs) too, DekaBank has set up DekaTreuhand GmbH. Using such a group trustee is precisely what SMEs need, as the setup costs are much less than companies having their own trustees. DekaBank’s group trustee is suitable both for outsourcing and insolvency protecting pension commitments and for commitments from working hours accounts and partial retirement schemes.
Capital is invested in selected Deka Investment funds, providing an attractive combination of returns and security. A range of investment models are available to suit your commitments and individual preferences.
Our services at a glance:
- Assistance with setting up trust arrangements
- Standardised group trustee agreements
- Investing and managing trust assets
- Insolvency protection for assets on trust and providing administration in the event of insolvency