German pension mode
This article discusses the technical details behind ProVal’s #SVR operator, including optional custom parameters. The methodology is as prescribed by the German Ministry of Finance (“Bundesministerium der Finanzen”) in memos dated March 15, 2007 and May 5, 2008.
Background
“SVR” stands for the German term “Sozialversicherungrente” and is generally the product of three things:
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Personal earnings points, or “Entgeltpunkte,” projected to age 60 when applicable;
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An Access Factor, or “Zugangsfaktor,” based on the type of benefit (i.e. whether the benefit is for disability / death; or a retirement benefit for ordinary retirement, severely handicapped retirement, or part-time pre-retirement (ATZ)); and
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The Current Pension Value, or “Aktueller Rentenwert” applicable to the member, annualized.
There is an additional multiplicative adjustment of 4/3 for members of the coal miners union.
Personal Earnings Points
Earnings points are determined based on specified formulas that are given separately for past and future points. For past years, from the Default Entry Age (DEA) up to and including the valuation date, each year’s earnings points are given by the following formula:
where:
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DEA is based on the ratio of Salary to Interim Avg Income:
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Salary = salary in the year preceding the valuation date, either based on the Valuation salary (from Census Specifications) or an alternative salary as specified by the parameters of the German State Pension custom operator. If the person was hired on the valuation date, then salary from the valuation year is used instead.
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BBG = BBG regulatory data in the valuation year, for the federal state and coal miner status specified under the Regulatory Data topic of Valuation Assumptions.
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Interim Avg Income = estimated Average Income value for the valuation year published two years prior (see note below).
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Bt is an adjustment factor intended to compensate for the unexpected increase in BBG during 2003. If Salary > 0.9 BBG, then for any Age > DEA:
| Ratio | Default Entry Age |
| At least 0, but less than 0.4 | 18 |
| At least 0.4, but less than 0.7 | 19 |
| At least 0.7, but less than 1.1 | 20 |
| At least 1.1, but less than 1.3 | 21 |
| At least 1.3, but less than 1.5 | 22 |
| At least 1.5, but less than 1.7 | 23 |
| At least 1.7 | 24 |
The accumulated past points at any point in time equals the annual points from that year, multiplied by cumulative service. Service for this purpose will be considered from the Default Entry Age, or the alternative field or Service Definition specified in the parameters of the custom operator. Note that in no case can alternative service be more generous (i.e., have an earlier entry age) than the Default Entry Age.
Note that Interim Average Income is the estimated Average Income published two years prior to the year in question. Internally, ProVal stores only the “true” Average income and derives the Interim Average Income based on established formulas. Sample development for the years 2008 through 2012 are shown below:
| Year | Average Income (West) | % Change from Prior Year | Interim Average Income (West) | Average Income (East) | % Change from Prior Year | Interim Average Income (East) |
| 2006 | 29,494 | 1.00% | 24,938 | 1.00% | ||
| 2007 | 29,951 | 1.55% | 25,294 | 1.43% | ||
| 2008 | 30,625 | 2.25% | 29494(1+2(1.00%)) = 30,084 | 25,829 | 2.12% | 24938(1+2(1.00%)) = 25,437 |
| 2009 | 30,506 | (0.39%) | 29951(1+2(1.55%)) = 30,879 | 26,046 | 0.84% | 25294(1+2(1.43%)) = 26,017 |
| 2010 | 31,144 | 2.09% | 30625(1+2(2.25%)) = 32,003 | 26,559 | 1.97% | 25829(1+2(2.12%)) = 26,918* |
| 2011 | 30506(1-2(0.39%)) = 30,268 | 26046(1+2(0.84%)) = 26,484 | ||||
| 2012 | 31144(1+2(2.09%) = 32,446 | 26559(1+2(1.97%)) = 27,605 |
Any increase rates (specified under the Increase & Crediting Rates topic of Valuation Assumptions or Projection Assumptions) that are applied to Average Income are applied only to the underlying Average Income amounts rather than to the resulting Interim Average Income; therefore, the increases on the Interim Average Income may not precisely match the increases specified for Average Income. In addition, note that the Interim Average Income (East) in 2010 has been coerced to the published value of 26,918, to compensate for a rounding discrepancy.
A separate formula is used for Personal Earnings Points after the valuation date. For these years, each year’s earnings points are given by the following formula:
In this case, the items are considered for each future decrement year. The accumulated future points at any point in time equals the cumulative sum of future points for all prior years. In the case of a Service Definition with non-unit service accruals, ProVal will adjust each year’s Future Points in proportion to the service accrual for the year.
The sum of accumulated past points and accumulated future points is then multipled by an Attribution Factor that projects service to age 60:
In all cases, the projected earnings points will be considered 0 for five years from the Default Entry Age.
Access Factor
An Access Factor is determined by the type of calculation performed. An argument of 2 will determine an Access Factor for Death/Disability benefits, while an argument of 1 will determine an Access Factor for Retirement benefits, specified by a coded field under the Regulatory Data topic of the Valuation Assumptions to be for ordinary retirement, severely handicapped or part-time pre-retirement (ATZ).
In the case of Access Factors for Retirement benefits, the following rules apply:
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The reduction is 3.6% per year from Normal Retirement Age (NRA) to Earliest Retirement Age (ERA) shown in the tables below.
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Ages below ERA are deemed to have a factor of 0 (i.e. Retirement is not allowed).
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Ages after NRA have an increase of 6.0% per year.
| Year of Birth | Ordinary Retirement NRA | Ordinary Retirement ERA | Severely Handicapped NRA | Severely Handicapped ERA |
| Through 1951 | 65 | 60* | 63 | 60 |
| 1952 | 65 | 63 | 63 | 60 |
| 1953 - 1961 | 66 | 63 | 64 | 61 |
| 1962 and after | 67 | 63 | 65 | 62 |
*Ordinary retirement before age 63 for years of birth up to and including 1951 is available for women only.
In the case of part-time pre-retirement (i.e., “ATZ”), NRA and ERA are based on the month of birth, rather than simply the year:
| Month of Birth | ATZ NRA | ATZ ERA |
| 1945 through 6/1946 | 65 | 60 |
| 7/1946 through 6/1947 | 65 | 61 |
| 7/1947 through 6/1948 | 65 | 62 |
| 7/1948 through 1951* | 65 | 63 |
*Any records specified as ATZ and born after 1951 will apply ERA of 63 but generate a warning during processing.
Access Factors for Death/Disability benefits are based on both the year of decrement and the age at decrement, applying the following rules:
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The reduction is 1.8% for the first year from Unreduced Decrement Age (UDA), then 3.6% for additional years.
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The maximum reduction is capped at 10.8%.
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There is no increase for ages after UDA.
| Year of Decrement | UDA | Age of max reduction |
| Through 2012 | 63 | 59 |
| 2013 – 2021 | 64 | 60 |
| 2022 and after | 65 | 61 |
Current Pension Value
The regulatory Current Pension Value (“Aktueller Rentenwert”) is then multipled by the projected earnings points and Access Factor for each decrement year. The value published for the valuation year is used for all prior years, while the known amount in future decrement years is applied to any years after the valuation date. Note that any ∑assumed future increases for Current Pension Values should be specified directly under the Increase & Crediting Rates topic of Valuation Assumptions.
A final multiplicative adjustment of 4/3 applies to any members who are specified under the Regulatory Data topic of Valuation Assumptions to be “coal miners”.
German Terminated Vested participants and Post-termination retirement benefits
The Salary, BBG, and Interim Average Income values for the SVR are frozen at termination.