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Such a positive development for pension funds was hardly to be expected given the considerable turmoil on the capital markets in the spring. Nevertheless, the funding ratio of German pension plans rose to new highs by mid-2025: 87.1 percent for DAX companies (82.0 percent at the end of 2024) and 79.9 percent for MDAX companies (74.5 percent at the end of 2024). Reasons for this included the increase in the international discount rate by around 30 basis points to 3.73 percent and an overall stable development of the capital markets. These are the results of the current model calculation “German Pension Finance Watch” by WTW.
“The significant interest rate increase in the spring was largely driven by the German government’s €900 billion investment package. The discount rate, in particular, benefited from this – significantly more than expected at the beginning of the year,” says Hanne Borst, Head of Retirement at WTW. The increase in long-term bond yields, and thus in the discount rate, amounted to more than 40 basis points in March as a result of the “special fund.”
Capital markets react more stably to political risks
In the first quarter, particularly in April, the announcement of new US tariffs and geopolitical tensions significantly impacted the capital markets. Nevertheless, there was no lasting negative impact: The markets recovered quickly, and the discount rate proved surprisingly robust overall. Plan assets increased by 2.0 percent to €266.2 billion in the DAX and by 3.3 percent to €45.9 billion in the MDAX.
“As recently as April, nervousness was palpable in the capital markets – and a setback in the funding ratio was quite conceivable. It’s all the more remarkable that pension funds have weathered this phase well,” explains Dr. Johannes Heiniz, Senior Director of Retirement at WTW. “The market now seems to have adjusted to the unpredictable US politics. Volatility has decreased noticeably.”
Diversification pays off
In addition to the increased discount rate, the active and diversified management of pension portfolios contributed to this stability. Pension obligations in the DAX and MDAX indexes declined by approximately 4 percent to €305.5 billion and €57.5 billion, respectively, which, together with asset developments, enabled the increase in the funding ratio.
“This development is another example of how professional management can be effective even under challenging conditions,” emphasizes Hanne Borst. “Companies that have strategically and diversified their pension plans not only contribute to financial stability but also secure their employees’ long-term occupational pensions.”
About the model calculation German Pension Finance Watch Q2/2025
How do current developments in the capital markets influence pension plans in Germany? This model calculation examines this question using three benchmark pension plans: one typical pension plan for the DAX and MDAX, and one pension plan that was fully funded as of December 31, 2003, and is continuously funded in the amount of newly earned benefits (100% plan). The analysis complements WTW’s studies on the impact of capital market developments on US benchmark pension plans (WTW US Pension Finance Watch) and global benchmark pension plans (WTW Global Pension Finance Watch).
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