Inflation-dependent pension trend assumption in the valuation of direct pension obligations under HGB and IFRS

Overview

The measurement of direct pension obligations is subject to a number of estimation parameters, which usually include an assumption for the future adjustment of current pensions (so-called pension trend). This pension trend and other trend assumptions are often significantly influenced by the expectation of future inflation, so that an estimate of future inflation rates must be made in order to determine the trend assumptions.

Against this background, the Accounting Working Group of the Expert Committee on Pensions set up the Pension Trend Sub-Working Group to deal with methods for determining inflation and pension trend assumptions. Although the results report primarily deals with the valuation of direct pension obligations, many statements apply accordingly to indirect pension commitments.

The report is addressed to the members and committees of the DAV for information on the status of the discussion and the findings obtained and does not represent a position of the DAV legitimized by the profession. This report concerns all IVS-certified actuarial experts for pensions and other DAV members who are involved in the valuation of direct pension obligations.