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We consider a savings plan, where the paid capital is guaranteed at time of retirement, in the German market available as Riester-Rente and supported by federal cash payments and tax benefits. We generalize several capital guarantee mechanisms to payment plans and compare their distribution: the return distribution of a classical insurance strategy with investments in the actuarial reserve fund, a CPPI strategy, and a Stop loss strategy, in optimistic, standard and pessimistic market scenarios.

The strategies include:

  • Classic life insurance
  • Live insurance linked to funds
  • CPPI
  • Hyprid approaches
  • Bank savings plan

To model the distribution we use a jump diffusion process parameterized to resemble the MSCI World index for the stock investment and a Hull-White Extended Vasicek process, calibrated to the euro zero-bond curve, for the risk free investment. We also analyze how fee structures and gap risk affect the performance of these savings plans. Additionally, we present a very simple parameter estimation method for this kind of simulation studies.

Our Investment Simulator has been used for comparative studies ordered by DWS, AXA, EURO-Magazin.

For a complete description, please read the paper published in the European Actuarial Journal: "Return distributions of equity-linked retirement plans under jump and interest rate risk", by Nils Detering, Andreas Weber and Uwe Wystup.

Riester Rechner (pdf german)

Zusammenfassung zu Garantiemodellen auf Deutsch (pdf)

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See our Pension Calculator for a simulation of such long-term investment plans.


Contact Try Pension Simulator (Riester Rechner)

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