Understanding the financial resources you'll need as you get older or in the event of disability or death enables you to choose the right tools to ensure you continue to enjoy the standard of living you're accustomed to. Analysing your financial situation early on is a crucial part of this.
As society and the economy change, the requirements placed on the perfect retirement provisions are also changing. This means that we as individuals must make provisions for our own financial future. Pillar 3a not only offers a range of options for mitigating the risks outlined, but also comes with attractive tax benefits. Both bank and insurance solutions are available for your savings.
Pillar 3a generally held with banks and insurers
If you choose an insurance solution, your financial contribution will consist of a savings premium and a risk premium. Bank solutions don't generally feature a risk portion. However, it can be covered by an independent risk life insurance. Under an insurance solution, the savings premium plus interest constitutes the capital the policyholder is entitled to when the insurance expires. The risk premium is paid in to guarantee financial protection (as a lump-sum or pension) for the event of disability or death.
Pillar 3a held with an insurer
The capital required to cover any gaps in income upon retirement is determined on the basis of a pension analysis. However, individual savings opportunities may decrease significantly if you become unable to work due to incapacity to work. This could result in you missing your savings target. With the right insurance cover, though, you are guaranteed to reach a certain retirement capital, even if you cannot work until retirement for health reasons. This is because the insurer covers your premiums up to the end of the insurance contract if you become unable to work.
If you want to ensure that you achieve the required savings capital while also offsetting any potential losses in earnings if you become unable to work, you should include a incapacity to work pension in your policy. If you become unable to work due to illness, compulsory social insurance will cover only 50-60% of your last income. Even so, more than 88% of disability insurance cases result from a physical or mental illness. New disability pensions following an accident account for only 6% of IV pensions. Nevertheless, cover under compulsory social insurance in this case is sufficient: those affected on a low to medium-sized income receive up to 90% of their previous income.
Pillar 3a held with a bank: pension provision without the insurance
The bank solution includes no insurance cover. The full amount of all contributions is used to build up your savings, which are either held on a standard interest account or invested in funds. A 3a bank account provides customers with a flexible, adaptable investment solution and enables you to adjust your investment strategy to current market developments once a year at no charge. Up to a maximum amount prescribed by law, you can freely choose when and how much to pay in.
If you'd like to also insure yourself against certain life risks, you'll need to take out an additional risk life insurance solution.