Occupational pensions – pension consulting

In the face of demographic change and skills shortages, the part of compensation represented by an occupational pension takes on great significance. Many companies offer a range of pension plan models. The German occupational pension system is characterised by a high degree of diversity that enables specifically tailored solutions. But this makes it all the more complex. PwC’s Pension Consulting business unit guides companies through the maze of occupational pensions.

Given the increased competition for qualified staff, companies have begun to view pension plans as a competitive advantage. Of course, no employee will opt for new employer just because of the pension plan, but a company might be at a disadvantage with no plan or an unattractive or non-transparent model. In the competition for labour, particularly in view of demographic trends, this is an important issue. Many companies are thus establishing new models or restructuring their existing pension commitments. Determining which structure is the most appropriate depends largely on each company’s circumstances. Through individual meetings and workshops, PwC’s experts form a needs profile with regard to the future design of the occupational pension plan. It takes into account both human resources and financial considerations. On this basis, PwC develops a concept for the future design of the occupational pension plan.

The following questions, among others, are addressed during this process:

• Defined-contribution plan or defined-benefit plan?
• Link pension provisions to the performance of securities, or not?
• Deferred compensation, employer-based or mixed-financing system?
• Lump-sum versus annuity payments?
• Old-age, survivors and/or disability benefits?
• External funding or internal book reserve financing?
• Internal versus external vehicle?
• In-house or outsourced administration?
• Requirements from partners/investors?
• International requirements?

Together with experts from other units (eg, PwC Legal), PwC develops the pension commitment based on the findings of the needs profile. PwC also supports presenting the new occupational pension plan (eg, at employee assemblies).

In addition to designing new pension plans, PwC also supports the restructuring of existing pension systems, whether due to substantive changes in a company’s priorities, statutory regulations or for accounting or tax purposes.

This entails consultation on restructuring existing systems, be it through substantive changes to pension plans and/or merging different plans into a unified system (harmonisation). Additionally or alternatively, PwC supports projects around financial outsourcing (eg, to a pension fund) or external funding (eg, through contractual trust arrangements). PwC takes pride in its independence from product interests, especially when it comes to demonstrating the advantages of different solutions.

Projects of this type begin with taking stock (needs profile of the client, an inventory of existing pension systems) and the assessment and evaluation of different solutions, and culminate with management analyses (before and after taxes) of the shortlisted solutions. In collaboration with PwC actuaries and lawyers, actuarial projections, actuarial equivalence calculations (scope of obligations) or pension commitments are developed as needed. During implementation, PwC coordinates with the beneficiaries (for example, with the works councils) and develops a communications strategy. PwC experts can also assume full project management – of course, in constant consultation with the client.

Tax and employment law conditions mean that the occupational pension plan may vary in different countries. Nevertheless, international companies often strive for a uniform pension policy. To that end, PwC’s experts draw on the knowledge accumulated in the international PwC network. With the help of both this network and information technology, PwC ensures that clients’ needs are considered in an international context.

In addition to the project-based activities described above, PwC experts also help with individual tax, accounting or employment law issues – for example, in the case of transactions (due diligence) or secondments.