The occupational pension is not just a second deferred salary that you receive when you retire. In fact, it comprises a package with two additional elements - a disability pension that provides you with compensation should you suffer from a long-term illness and cover for your surviving family members in the event of your death.
It is sometimes easy to forget that the benefits of the occupational pension are also applicable before you retire. It is important to remember that the pension offers cover should you suffer from a long-term illness. Firstly, you can receive compensation to make up for some of the difference between your salary and the compensation you receive from the Swedish Social Insurance Agency and, secondly, payments towards your occupational pension will not be discontinued.
The occupational pension can also aid your surviving family members in the event of your death. There are a variety of protection plans for your surviving family members which imply that they can receive compensation should you die. The money can be paid out in the form of a pension scheme or as a single payment, depending on the type of cover that applies.
There are two types of occupational pensions:
If you have a defined benefit occupational pension, you are guaranteed a pension corresponding to a certain percentage of your final salary. In order for you to get full retirement pension, you must have a job with ITP insurance until you are 65 and you must have a period of service within ITP for at least 30 years.
The other type of occupational pension is a defined contribution occupational pension, in which the employer pays in an amount corresponding to a certain percentage of your salary. The size of the pension depends on the amount of money paid, the rate of return and the commissions charged.
For a defined contribution pension, it is important to work for many years and to have a high salary for as many of those years as possible. Many of those who currently hold a defined contribution pension plan have the opportunity to choose their preferred savings form or the pension manager for their occupational pension.