Money-back guarantees in individual pension accounts : evidence from the German pension reform

  • The German Retirement Saving Act instituted a new funded system of supplementary pensions coupled with a general reduction in the level of state pay-as-you-go old-age pensions. In order to qualify for tax relief, the providers of supplementary savings products must offer a guarantee of the nominal value at retirement of contributions paid into these saving accounts. This paper explores how this "money-back" guarantee works and evaluates alternative designs for guarantee structures, including a life cycle model (dynamic asset allocation), a plan with a pre-specified blend of equity and bond investments (static asset allocation), and some type of portfolio insurance. We use a simulation methodology to compare hedging effectiveness and hedging costs associated with the provision of the money-back guarantee. In addition, the guarantee has important implications for regulators who must find an appropriate solvency system for such saving schemes. This version June 17, 2002 . Klassifikation: G11, G23, G28

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Author:Raimond MaurerORCiDGND, Christian Schlag
Parent Title (English):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2002,03
Series (Serial Number):CFS working paper series (2002, 03)
Document Type:Working Paper
Year of Completion:2002
Year of first Publication:2002
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2005/06/13
Tag:Limited Partnership; Long Term Investment; Pension Finance; Regulation; Shortfall Risk
GND Keyword:Deutschland; Private Altersversorgung; Kapitalertrag; Kapitalgewinn; Risiko; Hedging; Investmentfonds; Investmentsparen; Rentenreform; Mängelhaftung
Issue:Version June 17, 2002
Page Number:32
Institutes:Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht