Together With Debeka, We Develop Objective Assessment Frameworks for the Retirement Provision of Our Customers

The PIA basic model, developed by us at the Fraunhofer ITWM for the Produktinformationsstelle Altersvorsorge gGmbH (PIA), makes the opportunities and risks of capital market developments visible and helps to make well-founded decisions by creating more comparability - independently and neutrally.

Together with our project partner, we have further developed this basic PIA model – already recognized as the standard in private pension provision. The aim was to create a framework that meets the growing requirements for customer support, regulation and consumer protection. The most important innovation: an additional module for real interest rate modeling. This means that inflation trends can now be simulated precisely.

A central concern is to evaluate pension products taking real purchasing power into account. This makes it clear how inflation affects old-age provision. This helps Debeka customers to better assess what their situation will be like in old age and to identify gaps in provision. Our project provides answers and solutions to key questions:

• How can inflation be realistically modeled? What does the model for the consumer price index look like?
• How does the value of pension products change under different inflation scenarios?
• How is the model framework adjusted, i.e. calibrated, to the market situation?
• Which inflation-linked products can be valued?
• How are expertise and market forecasts incorporated into the calculations?
• What significance does the model have?

In addition to methodological research, we are developing application tools. With these project contents, we – the Fraunhofer ITWM and Debeka – are strategically positioning ourselves for future trends and the growing information needs of customers. The focus is always on consumer protection issues. As an institute, we also want to support the industry in implementing regulatory requirements and legal initiatives in a practical and high-quality manner.

New regulatory requirements are currently emerging at European and national level, which are placing greater responsibility on supervisory authorities and insurers in particular. In 2023, BaFin published information sheet 01/2023 [only available in German], which deals with the verification of the benefits of capital-forming life insurance products for customers. A central component: the consideration of real value development in order to realistically reflect the loss of purchasing power due to inflation.

Products are to be examined with the help of scenario analyses, with BaFin providing the standard for Packaged Retail and Insurance-Based Investment Products (PRIIPs). The German Actuarial Association (DAV) recommends the PIA basic model as the basis for this.

The topic is also gaining momentum at European level: In October 2024, EIOPA (European Insurance and Occupational Pensions Authority) published a consultation paper on the topic of »Value for Money«. As a scientific institution with many years of expertise in the classification of pension products, we have drawn up a statement to support supervisory authorities in making the benefits for customers measurable and assessable.

In 2018, Debeka approached our team at Fraunhofer ITWM with a view to using the PIA basic model for its company pension products. The aim of the so-called »Transparency Initiative« is to offer customers a uniform and transparent evaluation of the products. As Fraunhofer ITWM, we stand for objectivity and neutrality with our model standard – an important factor, as key return figures have so far mostly been calculated by the pension funds themselves.

At the beginning of the project, the focus was on the analysis of occupational pension tariffs and the modeling of diversification effects for equity investments. These topics are still relevant – equity modeling in particular is becoming increasingly topical again in view of the evidence of benefits for customers.

»The model has also established itself as a valuable tool for us in the sale of company pension schemes,« reports Dr. Matthias Herzog, who is responsible for training sales representatives at Debeka. Since 2023, Debeka has been using the model specifically to provide companies in particular with comprehensive and transparent advice. »Our customers benefit from the fact that we can present various market developments to them using scenarios – this creates a much better understanding of the complexity of multi-pot products and the impact of different investment strategies«.

Debeka's advices focus on companies that want to establish a company pension scheme for their employees. Here, the model helps to demonstrate both opportunities and risks in a fair and comprehensible way. »The scenario analyses help us to communicate complex interrelationships in an understandable way and to make well-founded decisions together with our customers,« says Herzog. The model also makes an important contribution internally: every year, around 20 to 25 new customer advisors are trained, who use the scenario calculations to develop a deeper understanding of Debeka's products and the dynamics of the capital markets.