Last update: 17.09.2024 08:35
The technical interest or technical interest rate is an estimate of the expected long-term return on pension assets. The technical interest rate is a calculation parameter used by your pension fund to express future benefits and contributions in today’s values. It therefore reflects the fund’s expected return on pension assets. It therefore answers the question “How much interest can be paid on the assets available for future pension payments in the future?”
If the fund sets the technical interest rate “high”, it overestimates itself and the coverage ratio. This means that the coverage ratio is higher than with a lower technical interest rate. The lower the technical interest rate, the more cautiously the fund calculates. Accordingly, with a lower technical interest rate, it already has to set aside more provisions for future pension obligations.
For this reason, many pension funds have started to reduce the technical interest rate in recent years as interest rates have fallen. The trend in the technical interest rate is below 2%. According to current data, 32% of private and 24% of public pension funds already have a technical interest rate below 2%.
Incidentally, the technical interest rate has nothing to do with the minimum interest rate or the effective interest rate on retirement assets.
If you would like to know more, you can read the article on“Preventive care”.
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