Pension insurance
Pension insurance: 3 technical terms explained – definition, synonyms and legal basis.
Return of Premium Rider (Beitragsrückgewähr)
Synonyms: Beitragsrückgewähr
A return of premium rider is a supplementary annuity provision ensuring that, upon death before the annuity starts, the premiums paid are refunded to survivors.
Concept
A return of premium rider is a supplementary benefit frequently agreed in annuity insurance that ensures, in the event of the insured’s death before annuity payments begin, at least the premiums paid are refunded to survivors or the designated beneficiary.
Relevance for Contract Design
Without a return of premium rider, the death of the insured person before the annuity commences would typically give rise to no claim, or only a very small one, under the contract, since pure annuity insurance is collectively funded (mortality gains benefit the surviving policyholders); agreeing a return of premium rider closes this gap at the cost of a lower annuity amount for surviving policyholders.
Distinction from Guaranteed Annuity Period
A return of premium rider, which covers death before the annuity begins, must be distinguished from a guaranteed annuity period, which guarantees a minimum number of annuity payments even after the death of the annuitant during the payout phase.
Pension Access Factor
Synonyms: Zugangsfaktor
The pension access factor is a factor used in Germany's statutory pension insurance that accounts for claiming the old-age pension earlier or later than the standard retirement age.
Calculation
If the standard old-age pension begins exactly at the standard retirement age, the pension access factor equals one. It decreases by 0.003 for each month the pension is claimed early and increases by 0.005 for each month it is deferred. The factor is multiplied by the accrued earnings points within the pension formula.
Effect
Early retirement therefore results in a permanent, lifelong pension reduction, while deferred retirement permanently increases the pension. The asymmetry between the reduction (0.3 percent per month) and the increment (0.5 percent per month) reflects different actuarial assumptions about remaining pension payment duration.
Practical relevance
The pension access factor is a key figure in deciding the optimal retirement date, and it materially influences how much private and occupational supplementary provision must economically offset an early pension claim.
Imputed Periods
Synonyms: Zurechnungszeiten
Imputed periods are contribution-free periods in German statutory pension insurance that are credited to increase the pension, offsetting the low pension resulting from an early reduction in earning capacity.
Purpose
If a reduction in earning capacity occurs early in a person’s working life, they will have accumulated only a few years of contributions, which without correction would result in a very low disability pension. Imputed periods offset this by fictitiously crediting the time between the insured event and a defined age as a contribution-covered period.
Calculation
The imputed period is the difference between age 60 and the actual date the insured event occurred. Valuing this contribution-free period with earnings points depends on the individual’s insurance record before the reduction in earning capacity occurred – typically the average of previously earned points is carried forward.
Practical relevance
Imputed periods are a core element of social protection against reduced earning capacity and directly affect the amount of the pension. They should be factored into needs analysis for private disability insurance as a complement to statutory protection.