Christian Petersmann, one of the managing directors and founders of VEDRA Pensions GmbH
1. Mr Petersmann, VEDRA Pensions has marked several milestones this year - 9 years of successful operations, almost 75 million pensions paid out and now the first buy-out in Germany with a bank as a partner. Would you have expected this when you took over ANT in 2016?
To be honest, we weren't thinking about building a long-term business model in 2016. We didn't know about pension buy-outs, and they didn't even exist in Germany at the time.
The origins of today's VEDRA lie in what is known as an 'opportunistic' acquisition. Back then, we received a proposal from the UK Pension Insurance Corporation (PIC) to acquire a company holding mainly pension liabilities from AEG Telefunken Nachrichtentechnik (ANT), a former Bosch subsidiary. This transaction was originally intended to be a one-off 'special situation' investment by my family office. This was both exciting and challenging for us, particularly as the company was in a complex and difficult position. The company had outstanding tax returns, unfinished tax audits with the threat of back taxes, suspended pension increases with the threat of legal action from pensioners, and negative economic equity as a result of previous bad investments in Southern European bonds. We were approached as a potential buyer because of our experience in distressed and special situations. After we had managed, with luck and skill, to resolve the tax situation in a way favorable to the company, we actually wanted to agree severance payments with the pensioners and wind up the company, until our actuary drew our attention to the general prohibition of severance payments.
The pension buy-out business model was still a long way off. But this transaction was, and still is, our responsibility for the decades to come. It was the inspiration for the product and market development of the pension buy-out in Germany.
In retrospect, it is of course cool that we, as someone who was completely unfamiliar with the pension industry at the time, introduced the pension buy-out in Germany after this very special transaction and developed it into the concept that we are now implementing with a regulated institution. The big names in the industry are now picking up on the issue and rightly describing pension buy-outs as 'the next logical step in de-risking'. This is a great compliment for us.
2. What do you consider the main milestones achieved by VEDRA Pensions?
First of all, there was the idea of creating a business model, which was born after the successful economic reorganization of VEDRA ANT. Since then, we have gained the trust of the pensioners and the former management of the operational business.
The spin-off and takeover of a portfolio of pensioners of CECONOMY AG with the pension plans of the former METRO Group in 2018 was certainly an even bigger milestone, as it was the first "planned" pension buy-out in Germany.
An important turning point was when my colleagues Michael Christner and Tilo Kraus joined our team as managing directors and co-partners at the beginning of 2022. With their experience, particularly in senior positions at regulated financial institutions, they have given valuable impetus to the further professionalization of our platform. They have also driven forward the institutionalization of the pension buy-out product with governance elements.
Earlier this year, for the first time, we surpassed the €70 million threshold in pension payments.
And, we are currently in the process of implementing a pension buy-out in Germany with a regulated bank as our business partner.
3. There is currently a lot of discussion about 'pensioner companies' or pension buyouts, and much is being written about them from a legal perspective. Do you see this as positive or confusing?
We think the increasing attention paid to 'pensioner companies' and pension buy-outs is fundamentally positive. The media and legal discussion - from pricing and the question of subsequent liability to the risks that companies are ultimately relieved of in the context of a pension buy-out (inflation, longevity, interest rates, capital investment) - is leading to a broader clarification and education of the market.
The current debate regarding the appropriate capitalization of a pension company and how much the providers should contribute to this also plays an important role. Internationally, the standard has been established as a provider contribution of 4-5% of the transaction volume. This "skin in the game" disciplines the provider in the purchasing process and creates a clear alignment of interests. It binds the provider to economic developments over the long term. At the same time, it helps to sustainably strengthen the financial soundness of the companies involved. It also underlines our long-term responsibility as a risk bearer - VEDRA Pensions stands behind this model as a reliable partner and risk bearer.
4. What do you expect to see from the German buy-out market over the next 5 to 10 years?
We believe that the German market for pension buy-outs is set to grow at a significant rate over the next 5 to 10 years. Empirical studies from the US and the UK show that pension buy-outs lead to an increase in the value of the company and an improvement in the company's credit rating - key drivers that should also have an impact in Germany. This is why such transactions are already well established in the Anglo-Saxon markets. The annual transaction volume in these two markets alone is currently around EUR 100 billion.
In contrast, there is still considerable room for improvement in Germany. Leading accountancy and consultancy firms estimate the market potential here at around €50-70 billion. According to the latest aba statistics, pension funds have cover assets of around 60 billion euros, while the balance sheets of German companies show accumulated pension obligations of around 700 billion euros.
We are very optimistic that further clarification, reference transactions and confidence-building established market standards regarding governance, equity etc. will help the German market to develop.
5. What is it about the topic of pension buy-outs that excites you personally, and where do you see VEDRA in the next 10 years?
What is it about the topic of pension buy-outs that excites you personally, and where do you see VEDRA in the next 10 years?
On a personal level, I am motivated by the desire to build a sustainable organization in a market that we have created ourselves. We work hard to ensure that the pioneer in this industry also becomes the market leader in the long term - this is not always the case.
What I find particularly exciting is that the market and we are constantly evolving - it's a continuous and dynamic process. The whole market has become more professional. We are happy about the other suppliers in the market, who inspire us to become better and better ourselves.
Personally, I really enjoy working together to create 'solutions'. It's about meeting the needs and requirements of everyone involved in a transaction in the best possible way.
Our vision is to be the 'Home of Pensions' in Germany - I think this is a very nice target image - it embodies 'being in good hands' and at the same time the claim to be the 'leading address'.