It’s important to us to explain the complex topic of the occupational benefit scheme as comprehensibly as possible. However, sometimes we cannot get around using technical terms. In our glossary we explain these technical terms briefly and in a reader-friendly manner.
Mathematical or policy reserve
A policy reserve is made up of the savings component of premiums capitalized at the technical interest. If the savings component of a premium is increased by any interest due - but not taking completion costs into account - then the term net policy reserve is used. By adding a reserve for future administrative costs to the net policy reserve then the inventory policy reserve is obtained. The policy reserve also plays a part in risk insurance since, for the complete duration of a contract, flat premiums are paid whereas the risks associated with death and disability increase with increasing age. This is the reason why the risk premium that the policyholder pays is too high at the beginning and too low later on in the contract period. So as to be able to meet their obligations, particularly at the later stages of a policy, insurers capitalize parts of the early high premiums in the form of policy reserves. When a life insurance policy is surrendered, then a sum equal to the completion costs which have not yet been absorbed is deducted from the policy reserve for the insured risk. The remaining sum is known as the surrender value.
Maximum BVG salary
The upper limit of an employee's income that is insured by the occupational pension.
Minimum interest rate
In occupational pension provision, this is the prescribed interest rate for retirement credits.