We are getting older all the time. That is nice, on the one hand, but this so-called longevity also comes with a certain risk. In technical jargon, this is called longevity risk. On the one hand, the term describes the risk that an insurance company has if insured persons live longer than originally calculated by the actuary. On the other hand, longevity can also become a risk for individuals. Especially when it comes to the retirement pension.
The history of retirement provision
To understand the longevity risk, it is worth taking a look back to the beginnings of old-age and survivors' insurance – OASI. The OASI insurance entered into force in 1948. Up until then, the care of older people was the responsibility of relatives, charitable organizations and the church. Since 1972, the 3-pillar system has also been enshrined in the Federal Constitution.
The 3-pillar system
The three pillars are based on the principle that retirement provision consists of governmental, occupational and personal retirement provision. OASI is part of the first pillar and is considered governmental retirement provision. It is intended to secure the existence of all people living in Switzerland. The pension fund is the second pillar, the so-called occupational retirement provision. It serves to maintain the lifestyle people are accustomed to. The third pillar is a personal retirement provision funded by your own savings. It is intended to maintain the accustomed lifestyle and fulfill wishes in old age. For more information on the 3 pillars concept, see the corresponding article.
A lot has of course already changed in society since the introduction of the 3-pillar system in 1972. Among other things, we are living a lot longer, hence the term longevity.
From a 5- to a 21 year-pension
In 1972, the average life expectancy of men from birth was just under 70 years, and that of women was around 75 years. A man who retired in 1972 had to make do with his pension for an average of five years.
Men and women who turned 65 in 2017 will live to 86 and 90 years old on average, according to statistics from the federal government. This means their pensions will have to cover them for over 21 years.
According to calculations, these numbers are expected to increase and the trend is moving towards longevity. We are spending more and more time in retirement and, fortunately, in good health. However, this means we also have to draw an increasing amount from the retirement pensions.
Longevity without risk
When you reach your normal retirement age, you have to decide how you want your pension fund and 3rd pillar assets to be paid out. The matter is now to manage the money so that it lasts until the end of your life. The remaining life span is underestimated by most people. This means a long life can also turn into a financial risk.
You can find more information on the topic of pensions or lump-sum payments on our overview page.
Pension – the safe way
The 1st pillar – OASI leads the way: All people who have worked in Switzerland are entitled to a monthly OASI retirement pension. This minimizes the longevity risk because you receive an OASI pension every month – for life.
With the 2nd pillar – the pension fund – you have the choice between a lump-sum payment, a pension or a combination of both.
Our retirement pension offers you the possibility of converting your 2nd and 3rd pillar assets into a secure pension as well. The old-age pension is an insurance policy under which your credit balance from the 2nd and/or 3rd pillar is converted into a lifelong pension.
You can also take out this insurance at any time, retrospectively as well, even if you originally opted for a lump-sum payment when you retired.
This way, you receive a contractually fixed premium every month for life – regardless of the development of the capital markets or your life expectancy. What's more, you can also insure your partner as well as provide benefits to your surviving dependents.
You can find more information about our retirement pensions on the overview page "Financially secure, for as long as you live".
Our experts will be happy to advise you so that you can make the best possible decision. So make an appointment and find out more about the options for a financially secure retirement.