What is meant by redistribution in occupational retirement provision? Are our employees affected by this?
The idea behind occupational retirement provision is that all insured save for themselves and build up their own retirement assets, which are used to finance their retirement benefits later in life. In the past decades, however, the framework conditions have changed fundamentally. Life expectancy has risen sharply, meaning that retirement savings capital of retired persons will have to last longer and longer. What's more, the number of pensioners compared to active insured is also increasing. Interest rates, on the other hand, have fallen. The current conversion rates are too high because they assume a shorter life expectancy. This creates a funding gap. In order to plug this gap, today's working population will have to forgo part of the returns on their retirement savings capital for the benefit of those claiming a pension – this leads to unwanted redistribution from the active insured to the retired persons.
This unwanted redistribution is a fundamental problem of occupational retirement provision, from which the insured of the Vita Collective Foundation are not completely spared. In order to keep redistribution as low as possible, we rely on a fair and flexible approach, and we regularly adjust the technical interest rate in line with market conditions.
Vita Invest offers one way to avoid this cross-financing. With this solution, you set up your own pension fund with its own balance sheet and accounting - and your employees' pension assets are managed independently of the rest.