Let's talk about … occupational retirement provision

It is sad but true: Among the employed in Switzerland, knowledge of the interaction between the three pillars is relatively low. In particular, many people are not aware of the supporting role of the 2nd pillar for retirement provision. This can be seen in a recent study by the research institute Sotomo on behalf of Vita and Zurich Switzerland: The accumulated BVG retirement provision assets represent the most important part of the savings capital for the majority of employees. Nevertheless, only a minority of the respondents, 44 percent, know that this money is part of their own assets. In contrast, two-thirds or 66 percent are aware that pillar 3a is part of their assets. Just 17 percent of the respondents know the exact situation regarding their current pension fund assets, while a good half of them (56 percent) know about it at least approximately.

The deficits are particularly large among the younger generation: For an index regarding pension plan participation, on a scale of 0 to 4, respondents in the 18–25 age group scored just 0.7. Knowledge is therefore very low. The index then increases steadily with age, reaching a peak of 2.9 in the years before retirement (ages 56-65).

Anyone that wants to make targeted and optimal provision can only do so if they know and understand how retirement provision works and how the three pillars interact. Even with a very good pension planning solution, there may be individual gaps depending on the biography and situation, which could have a painful impact in the event of disability, for example. Similarly, many people are not aware that there is undesired redistribution in the second pillar. This means that part of the income on the invested retirement assets is required to finance current pensions. Because of this, the people paying in no longer benefit from these redistributed amounts.

Not only employees, but also many owners of SMEs neglect the "pension fund" topic somewhat. This is because many people are still unaware that there are noticeable differences between the various offers on the market in terms of returns and future viability. Not all pension funds are the same. This is more true today than ever before due to demographic challenges and low interest rates.

Owners and managers of SMEs thus have a dual responsibility:

• First of all, they should find an optimal pension fund solution for their team and themselves and communicate its strengths. This will allow them to score points as an attractive employer, enabling them to attract and retain talent on a long-term basis.
• Secondly, they must assume that their employees have a lack of knowledge when it comes to retirement provision, which means they should raise awareness of the importance of this topic: This understanding is the prerequisite for successfully shaping one's own financial future, exploiting the potential of occupational and personal retirement provision and thus making the most of opportunities.

By the way, the interest of your young employees in the topic of retirement provision is greater than you might think. The Fairplay study also revealed this : When asked how they would invest 10,000 Swiss francs they received as a gift, a surprising number of young people were willing to deposit the money in a blocked account with a fixed interest rate and a 10-year term. In the 18- to 25-year-old age group, 54 percent would choose this "squirrel mentality" option. In the 56 to 65-year-old age group, the figure is only 32 percent.

Apparently, the young are well aware that in today's changing times; they need to plan for the future in the long term. In fact, the compound interest effect over longer periods makes this particularly worthwhile. At the same time, the study also shows that older people invest more on average and, above all, in a more targeted and profitable manner. Given the current savings interest situation, there is still a lot of untapped potential, especially among the younger generation.