Iterata Finance Platform

Occupational Pensions Tomorrow: Importance of the Second Pillar Continues to Grow

If we look at the field of tension in which occupational pension provision finds itself today, it becomes clear that it will play a significantly greater role in the context of pension systems in the future.

The pressure on statutory pension insurance is constantly increasing due to demographic developments. In contrast, the importance of occupational pension systems is rising steadily.

By organizing pension provision via the employer, considerable economies of scale and efficiency can be realized compared with private solutions. This increases the pressure on companies to offer modern pension concepts for their employees.

Company pension schemes are no longer socially motivated fringe benefits. As an essential part of total compensation, it already plays a significant role in the competition for qualified employees. As a result, companies must offer modern, attractive pension concepts whose benefits are convincing to employees. For employers, this creates the opportunity to use their own attractive concepts as a strategic component of efficient total compensation and thus gain a decisive competitive advantage in the labor market.

Employee View:

Pension contributions are wage deductions, future benefits are seen only vaguely

For most employees, pension fund contributions are primarily wage deductions. The benefits to be expected are only inadequately perceived, even by many well-educated and informed employees. The perception of pension security is extremely dependent on political moods: current example the unfortunate "pension theft" discussion.

Pension Provision:

Pension Fund Analysis System (PAS)

Better representation of the benefits of payments through monthly (or quarterly) pension statements analogous to payroll statements. Due to the leverage effect of long-term investments, the projected retirement capital grows strongly compared to the amounts paid in, especially for young employees.

As a result, future benefits are seen as a component of total work compensation. Due to this expectation, pensions have to be made more predictable by using appropriate financial instruments.

History of Company Pension Schemes

Company pension schemes yesterday: characterized by the welfare concept

Against the background of a lack of or completely inadequate pension systems, companies initially granted emergency assistance and ongoing support to needy former company employees and their surviving dependents. As a result, the scope of company support was shaped by the concept of welfare for a long time. With the introduction of statutory pension insurance, occupational pensions took on a supplementary function; their amount was geared exclusively to pension requirements.

Company pension schemes today: the recognized second pillar of the pension system Company pension schemes today are the recognized second pillar of the pension system - between statutory pension insurance as the first pillar and private pension schemes as the third pillar. The number of companies offering company pension plans is rising steadily.

The focus is increasingly on the idea that company pension plans are part of the overall compensation package (so-called total compensation approach), while the paternalistic pension approach is increasingly receding. In the course of this development, more calculable and communicable defined contribution systems are replacing traditional company pension systems; modern financial products are being integrated into company pensions. Legislators have become active in many areas. The main objectives are to promote the institution of company pension schemes and to protect employees' acquired pension rights. Numerous different design variants and financing forms (so-called implementation paths: direct commitment, support fund, direct insurance, pension fund and pension fund) are available to companies.

Version:0.1 / Last update: 29.01.2021 - 16:34