At a glance
- Development of the risk-bearing funding ratio in 2011 by PPCmetrics AG
- Adoption of the risk-bearing ratio by approx. 1/3 of all pension funds
- Measurement of the burden on the risk carriers of a pension fund
- Neutralisation of different technical interest rates and cash structures (pensioner share)
- Creation of transparency and comparability from the perspective of the risk carriers
Video - Risk-bearing funding ratio (in German)
The risk-bearing funding ratio
The risk-bearing funding ratio was developed by PPCmetrics AG in 2011.
The risk capacity of a pension fund is made up of its financial and structural risk capacity. The risk-bearing funding ratio consolidates both dimensions of risk capacity in one key figure and measures the burden on the risk carriers of a pension fund. The risk carriers are the active plan members and the employers. Current pensions, on the other hand, are guaranteed by law. The higher the share of guaranteed pensions in total benefits, the more the risks are concentrated among the active plan members. The risk-bearing funding ratio creates the necessary transparency with regard to the situation of the active plan members. In contrast to the funding ratio shown in the annual financial statements, the risk-bearing funding ratio neutralises different technical interest rates and pension fund structures (pensioner share) and thus enables a direct comparison of different pension funds.
More transparency for risk carriers
The risk-bearing funding ratio shows the funding of the non-guaranteed (i.e. "risk-bearing") benefits and thus serves as an indicator of the burden on the risk carriers. The following calculation scheme is used:
By far the most important guaranteed benefits of a pension scheme are the current pensions. If the capital required for the guaranteed payment of these pensions (economic liability of pensioners) is deducted from the total available pension fund assets, the assets remaining for the funding of the non-guaranteed benefits result. The ratio between these remaining assets of active plan members and their retirement savings (vested benefits) is what we call the risk-bearing funding ratio.
Some funds have additional guarantees for the active plan members or variable pension components ("bonus pensions"). In such cases, the calculation scheme can be adapted accordingly.
