What is meant by redistribution in occupational retirement provision?
The idea of occupational retirement provision (second pillar) consists of all insured persons building up their own balance that they will use to finance pension benefits later. However, over recent decades the framework conditions have changed fundamentally. Life expectancy has risen sharply, while interest rates have decreased. As the pension benefits promised earlier cannot be financed sufficiently, redistribution takes place from the active insured (people in employment) to benefit recipients (retired persons).
This cross-financing is a fundamental problem of occupational retirement provision, and even the insured from the Vita Joint Foundations are not completely protected from this. To keep redistribution as low as possible, we use a fair, flexible process and regularly alter the guaranteed minimum interest rate in line with market conditions. We also provide transparent information: On our website we have set up a tool that uses age, salary and pension fund assets to estimate how significantly you are personally affected by redistribution.
Vita Invest offers an opportunity to avoid redistribution entirely. With this retirement provision solution, the pension fund assets of employees are invested with an individual balance sheet and income statement. Since no redistribution takes place and the savings balance can be more attractively invested, Vita Invest enables better return opportunities in the long term.