The capital adequacy of defined benefits in the drawdown phase of investment-based pension provision contracts: Credit and capital

01.01.2009

Pension provision, Risk & Optimization

42. Jahrgang, 2009, Heft 2 (2009)

Authors

Duš, Dr. Ivica Raimond Maurer

Abstract

This study focuses on the financial defined benefits, which capital investment companies give to contractual partners during the benefits phase of pension provision contracts, (also referred to as Riester contracts). According to the Certification of Retirement Pension Contracts Act, a Riester contract provider must ensure that payments, which remain constant or increase over time, are made to the contractual partner during the entire benefits phase. In case of doubt, the provider shall be liable for compliance with defined benefits with their equity capital, and they must therefore maintain an adequate level of equity capital. There are currently no explicit supervisory board regulations which cover the equity capital requirements of investment-based pension provision contracts in the benefits phase. The aim of this work is to fill in this gap. Firstly,the financial features of defined benefits in the benefits phase are highlighted, then a conceptual proposal and the specific methodological design of a supervisory equity capital system are discussed and, finally, the effectiveness of such a system is demonstrated in the context of a simulation study. (JEL G11, G22, G23, G28, K23)

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