WTW publishes on its website:
The funding ratio of DAX pension funds reached 82% in 2024, its highest level in ten years. Positive capital market developments in the 2024 fiscal year led to an increase in the plan assets of DAX companies (EUR 262 billion, +1.6%). The discount rate increased, particularly in the first half of the year, and was a total of eleven basis points higher than the previous year. This led to a slight decrease in pension obligations (EUR 320 billion, -1.8%). Overall, the funding ratio thus increased by a further three percent from a high level. These are the findings of the “DAX Pension Funds 2024” study by the management consultancy WTW. Experts expect rapidly changing economic conditions in 2025. Political decisions will influence the discount rate and the capital market, requiring robust pension management from companies.
The WTW study “DAX Pension Funds 2024” is based on 31 analyzed annual reports from the 40 DAX companies. It provides an overview of the past year’s performance and also offers an outlook for 2025. Hanne Borst, Head of Retirement Germany at WTW, commented on the new findings: “The capital market recorded positive performance in 2024. Equity markets, in particular, achieved high returns due to a robust US economy. In 2025, we expect greater volatility in the discount rate and the capital market. However, in our view, there is no cause for concern: DAX companies are actively managing their pension obligations and are thus able to respond to current developments.”
“The pension funds of Germany’s largest companies are well positioned. Agility and willingness to change are important characteristics for a future-proof setup. Given the high level of funding, pension buyout solutions are becoming increasingly important. In addition to the well-known de-risking options, such as CTAs and pension funds, pension buyouts are another attractive option for companies to position themselves agilely and future-proof,” adds Dr. Johannes Heiniz, Head of General Consulting at WTW.
Rising pension assets and declining pension obligations ensure maximum funding level
The funding ratio increased by a further three percent in 2024, reaching a new high of 82%. This was primarily due to positive developments in the capital markets (+6.4%), which, although still volatile, proved significantly more robust than in 2023. Inflation rates fell, economic growth in the US proved stable, and the US Federal Reserve (FED) and the European Central Bank (ECB) implemented their first interest rate cuts since the beginning of the coronavirus pandemic in 2020. Pension assets recorded corresponding gains overall. The changed index composition led to a 1.2% reduction in pension assets. Overall, pension assets increased by 1.6%.
“At the beginning of the first quarter of 2024, market participants’ excessive expectations of ECB interest rate cuts were revised, resulting in a noticeable increase in the discount rate. The further decline in inflation in the eurozone and the US subsequently shaped the second half of 2024. The actual discount rate cuts implemented by the ECB and the Fed had largely already been priced in by market participants,” says Hanne Borst. As a result, the discount rate as of December 31 was eleven basis points higher than the previous year. This led to a decline in pension obligations to EUR 320 billion. In addition, the reduction in the long-term pension trend assumption reduced pension obligations slightly. The change in the index composition also led to a moderate reduction (0.9%).
With an allocation of €5.3 billion, companies are investing slightly more in company pension plans than in the previous year (€4.9 billion in 2023), despite the still challenging economic environment. Pension obligations that are not backed by specific pension assets are covered by other assets within the companies. From an economic perspective, pension obligations are therefore always fully funded, with a total funding ratio of 100 percent.
2025 brings high volatility and requires robust pension management in challenging times
Pension schemes are subject to a complex interplay of inflation, the discount rate, and capital market developments. The extent to which political decisions determine the discount rate and the capital market became apparent in the first half of March 2025: The announcement of a reform of the German debt brake in the form of a “special fund” of EUR 900 billion led to an increase in the yields of long-term bonds and thus in the discount rate of more than 40 basis points. “The discount rate is the parameter with the greatest influence on pension obligations. A market-driven change in the discount rate of one percentage point leads to a change in pension obligations of approximately 10%. The amendment to the Basic Law has been approved. The market had already anticipated this development, and no further effects on the discount rate are expected in the short term,” says Hanne Borst.
US politics will also impact capital market developments in 2025. “While stock and bond markets started 2025 on a stable note, capital markets have been volatile since the inauguration of the new US president. Furthermore, fears of a recession are spreading in the US, as current US policies are unsettling investors,” says Hanne Borst. International tariff disputes, military and economic stimulus packages of historic proportions, and the various still unresolved geopolitical crises, most notably the war in Ukraine, will keep capital market volatility elevated throughout the rest of the year and impact inflation and interest rates.
So far, inflation in the Eurozone in 2025 and 2024 is significantly lower than in 2023. However, market expectations for further interest rate cuts by the Fed and ECB have been scaled back, as various political decisions, such as the punitive tariffs announced by the US government, are expected to have an inflationary impact. “The pension plans of DAX companies are well positioned to address challenging and rapidly changing economic conditions through risk-optimized designs and diversified investment strategies,” says Johannes Heiniz.
Trends in occupational pensions: Pension schemes between transformation, demographics and growth
Many industries and companies are undergoing fundamental transformation processes. Pension buyout solutions are becoming increasingly important to enable companies to focus more fully on their core business. Unlike conventional de-risking options such as plan design, outsourcing, CTAs, and pension funds, pension buyouts offer the possibility of complete release from liability. “The high degree of funding gives pension buyout solutions additional momentum. Companies can use the set-aside funds exclusively to fund pension obligations. Accordingly, now is a good time to initiate planning in this direction,” says Johannes Heiniz.
AI is also gaining importance in company pension schemes. Companies see this as an opportunity to improve their company pension services and relieve specialists of routine tasks. Given demographic change, it is important for companies to future-proof their company pension schemes. Attractive pension plans remain an important tool for retaining and attracting employees. According to studies by WTW, company pension schemes are more important than ever for 51% of respondents. Employees consider it important that company pension schemes are high-yield, transparent, and flexible. Therefore, current pension plans are generally capital market-oriented. ESG criteria are becoming increasingly important.
Background information on the study
The “DAX Pension Funds 2024” study is based on the annual reports of the 40 DAX companies, including the notes to the pension obligations and other publicly available data. As of March 20, 2025, 31 index members had submitted their figures for the 2024 fiscal year. For nine companies whose current data have not yet been published, WTW considered previous year’s figures and thus performed projections. The current figures for the DAX 40 refer to the index as of December 31, 2024. The previous year’s figures presented represent the actual values of the DAX 40 as of December 31, 2023. The WTW database underlying the analysis allows comparisons back to 1999
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