Traditional retirement plans are like a one-size-fits-all suit, while a tailored suit fits and looks much better. Imagine two employees: one has a stable, long career and wants to build up his pension slowly, while the other works more flexibly, changes jobs frequently and wants to reach his savings goals more quickly. In a collective pension fund, both workers receive the exact same plan. This means that the flexible worker cannot adjust enough to meet his or her retirement goals. In an individual pension model, this employee would have more control over the deposit and portfolio, making it much more likely that the desired goals are indeed achieved.

This lack of flexibility not only affects employees, but also places a heavy burden on employers. Collective pension plans have financial risks attached to them and they involve a lot of administrative work. Let's take a closer look at the specific costs and risks that traditional pension funds impose on employers.

Employers' costs and risks of traditional pension funds

Traditional retirement plans were designed for a time when employees spent their entire careers with one employer. But this is now long gone. The growing flexibility in careers, with employees switching jobs more often or working in flexible forms of employment, requires retirement solutions that fit individual needs.

Employees do not have the ability to customize their contributions or portfolio to fit their personal circumstances. This collective nature, where everyone is covered under one set plan, does not take into account the unique needs of employees.

In addition, employers are less willing to bear the risks associated with traditional pension plans. The administrative complexity and financial burdens, such as top-up payments in case of shortfalls in pension funds, make the system unattractive to companies. It places responsibility for potential shortfalls on employers, something many companies try to avoid.

As Alexander Brewer, founder of Vive, explains, "As an individual, you need to get a grip on your future. You must have the ability to steer your financial goals, just as pension administrators do for collective funds. We call this governance, or self-determination: the ability to make effective decisions about your own financial situation."

And that is exactly why Vive was founded. To offer employers and employees an alternative that is better suited to society as it is today and to the individual needs of employees.

Benefits of a new pension model

Vive's new model fits seamlessly with the needs of both employees and employers. For employees, Vive's model offers important benefits. First, they gain greater insight and control over their pension accrual. With access to tools such as scenario analyses, they can see how their pension might develop in the future and make timely adjustments if necessary. This creates less uncertainty and more confidence in their financial future. 

In addition, Vive offers flexibility: employees can adjust their savings goals according to their life stage, whether that's building up retirement, saving for a house, or setting aside money for a trip around the world. This personalized approach increases engagement and motivation to actively engage with their financial future.

And the great thing is that this approach eliminates significant costs and risks for employers as well.

Employers benefit from:

• Lower risks: No more unexpected top-up payments to cover deficits in a collective pension fund.
• Less complexity: Instead of being stuck with complicated and outdated pension rules, you offer your employees a flexible solution that adapts to their personal goals. Plus, they simply take their bag of gold with them when they move to another employer. 
• Greater employee engagement: Employees gain more insight and control over their retirement, which creates greater engagement and satisfaction. Think conversations around the coffee machine about their contributions or the returns they have so far.
• Attractive employers: In a competitive job market, you can stand out with a modern and flexible retirement model that meets the needs of your employees.

Through advanced tools, such as scenario analyses with 2000 possible outcomes, employees can gain insight into their future pension accrual. As an employer, you no longer have to contribute to an inflexible system; instead, you offer your employees a tool that allows them to independently manage and optimize their pension. 

Want to avoid being stuck with an inflexible and costly retirement model? Find out how Vive gives your employees more control ánd takes the burden off your business. Contact us today!