Occupational pension provision in 2050

The PKG Pension Fund was established in 1972 as a pension fund for trade, commerce and industry in Lucerne. It was the same year that the three-pillar model of Swiss pension provision was adopted with a yes vote of 74 percent and subsequently enshrined in the federal constitution. Now the pension fund has also looked to the future and commissioned a study from the Lucerne University of Applied Sciences and Arts. "In essence, the study shows that the trend of increasing life expectancy will continue and that work and family models will continue to change. Individualization will increase, which will reduce the willingness to show solidarity and increase the demand for transparency. Politicians will have to set the course for the design of pension models," Peter Fries, Chairman of the Management Board of PKG Pensionskasse, concludes the study.

The main features

No one can know today exactly what the world will look like in 2050; however, megatrends that are already emerging today provide indications of how society and the economy might one day have changed. This allows differences ("gaps") between future and current social life to be identified, which make it possible to derive the most important features that an occupational pension plan must have in order to survive in 2050.

For this reason, one objective of the study was to describe the implications of specific megatrends on the pension system and to provide food for thought on how occupational pensions should be structured in 2050. The following research questions were analyzed:

• What are the most important aspects of today's occupational pension plan with regard to the accumulation and dissaving of retirement capital?
• Which megatrends will shape social and economic life in 2050?
• What are the gaps between current and future social life in 2050?
• What are the implications of these gaps for occupational pensions?
• How must occupational pension provision be designed, given the premise of megatrends, to meet the economic realities and social life in 2050?

Megatrends with an impact on retirement provision

The relevant megatrends are social, technological and demographic change. They are leading to a society in which individualization and self-fulfillment are highly significant and are shaping how people live together, both in private and in society. The platform economy will be predominant. It is characterized by flexible, non-permanent employment relationships. Platform employment and crowdworking will lead to widespread self-employment. In addition, it will be possible to live a longer and healthier life.

More personal occupational pension

The major differences between the society of 2050 and that of today mean that both sexes will increasingly pursue part-time and self-employment, which would increase the number of uninsured gainfully employed persons if the current pension system were to be maintained. Gainful employment is also increasingly being reconciled with private life, which entails more time off during the employment phase. There will be a greater desire to determine retirement individually according to one's own vitality. The effective working life will therefore be much more individualized. Adherence to a predefined retirement age would not do justice to individual preferences. The desire to shape occupational pension provision more in line with one's own needs is contradicted by the current redistribution of occupational pension provision, which is secured by guaranteed benefits.

Food for thought for occupational pension provision

For the future design of occupational pension provision in 2050, the study formulates the following food for thought:

• All earned income is taken into account for the formation of pension assets. No longer are only employees with a certain salary level insured.
• The occupational pension plan is linked to the insured person. This means that the employer is no longer obliged to organize the occupational benefit plan. However, he will continue to co-finance the contributions.
• The length of the savings phase is determined by the working life. The start and end of the savings phase are no longer dependent on reaching a certain age.
• It is possible to save for time off during the accumulation phase.
• There must be a clear separation between social policy objectives and individual pension savings. Benefits are no longer guaranteed, not even those in the savings phase. The insured person determines his or her own occupational pension provision within a statutory framework.

Occupational pension provision continues to retain its mandatory character and thus its importance for overall retirement provision. It therefore also remains up to politicians and society to answer various unanswered questions about the design of future occupational pension provision.

Source: PKG Pension Fund