Standardized Evaluation of Pension Products

Interview with Dr. Normann Pankratz, Debeka Insurances

Since 2016, a team from the »Financial Mathematics« department has been classifying state-subsidized pension products on behalf of the »Produktinformationsstelle Altersvorsorge GmbH (PIA)«. A model that has set standards and has now been adapted to make occupational pension contracts objectively comparable.


Mathematics Creates Transparency: Secure Provision for Retirement

In recent years, the basic PIA model has established itself as the industry standard in Germany. An adapted model for comparing rates could also support policyholders in the area of company pension plans. This is because there are more different tariffs in this pillar of retirement provision and the offers include different model calculations and key performance indicators. It is difficult for interested parties to evaluate the products. Therefore, the ITWM team is now working with Debeka in the project »Transparency Initiative for Occupational Pension Plans« for more transparency. The insurance company has developed a new pension product for company pension plans, which is to be offered in 2023. Similar to other pension products, the key product figures important for sales are to be determined on the basis of a mathematical model. The goal here, too: To create an assessment framework for tariffs that enables a fair comparison of offers. Ideally, a cross-pillar standard should emerge that makes it easier for policyholders to assess their retirement provision as a whole. 


In this interview, Dr. Normann Pankratz, member of the executive board of Debeka Insurances, explains what this means and what the cooperation with Fraunhofer-ITWM looks like.

Dr. Normann Pankratz, Mitglied im Vorstand der Debeka.
© Debeka
Dr. Normann Pankratz, Mitglied im Vorstand der Debeka: Dezernent für die Bereiche Allgemeine Versicherung, Aktuarielle Funktion, Krankenversicherung/Technik sowie Lebensversicherung und Pensionskasse/Technik.

Interview with Dr. Normann Pankratz, Debeka Insurances

One goal of our joint project »Transparency Initiative for Occupational Pension Plans« is to create greater awareness of a standardized evaluation of pension products in the industry. 


Dr. Normann Pankratz, how can you imagine this in practice? What has happened so far and what is still to happen?

To increase comparability, the Retirement Provision Improvement Act introduced a mandatory product information sheet for state-subsidized products for private retirement provision. Since 2017, consumers have already had to be informed by the information sheet before concluding a contract in order to enable a product comparison in an easily understandable and standardized form.

For the population in Germany, occupational pension provision represents a very important component and, moreover, the market offering is multi-layered. Debeka develops and sells different tariffs in the area of old-age provision and aims to use a standardized procedure for forecasting benefits for these. 

The Fraunhofer ITWM has been working with you for years, what makes the cooperation so special?

We already learned to appreciate the close cooperation with Fraunhofer ITWM during the establishment of the Retirement Provision Improvement Act, in particular the classification of our tariffs for private retirement provision. With the consortium »Das Rentenwerk«, we then entered completely new territory in the context of company pension plans (bAVII), and both a target-oriented implementation and the know-how in the modeling of the capital market model convinced us.

Why is it important to create more transparency for occupational pension products?

The complex market offerings of occupational pension products should be assessed and evaluated with the help of model calculations and key performance indicators. However, the providers are responsible for creating these presentations themselves and have not been subject to any standardization to date. As a result, the comparison of products is not transparent. The use of different capital market models entails uncertainty with regard to the expected opportunities and risks of the product. The complexity of the situation makes it difficult for customers to make an appropriate decision on product selection. In order to create more transparency, we are also striving for a standardized evaluation for occupational pension products. 

Where do you see the biggest challenges?

When establishing a standard, broad agreement is needed from the participating stakeholders. Certainly, the interests must coincide for this to happen. With the establishment of the Retirement Provision Improvement Act, we have ensured transparency, and transparency generates trust among customers. 

What current developments do you see on the market, and how is your company responding to them?

On the one hand, product diversity with different guarantee levels is increasing on the market. This combines different algorithms for generating guarantees and a wide range of choices for free investment, which increases the complexity of the products. On the other hand, there is no uniform standard in the market for occupational pensions with regard to comparability. In order to offer a product that is appropriate to the profile of the customer, it is now very important to establish a standard for comparability. This has already proved successful for the Riester pension and the basic pension. 

What role can applied research and financial mathematics play?

Research work provides important impulses and is an essential component in financial mathematics. With the development of stochastic capital market models, it is already possible to account for the product characteristics of different product classes and investment models. While the models provide a more realistic representation of performance, the development of mathematical models leads to standardized valuation methods and thus to transparency. 

These developments are intended to make occupational pensions more attractive. Is such a model also conceivable for other insurance products?

With the transparency initiative, we are first of all increasing the comparability of products within the occupational pension market, thereby promoting public confidence with regard to occupational pension products. In fact, I am convinced that the transparency initiative is also conceivable for the comparability of products across all three pillars of retirement provision, i.e., occupational, statutory and private.