Three parts of pension liability
Pension liability should in a secure way reflect the obligations of the company. A liability arises when your company offers a promise of future pensions for the employees. The value of a pension obligation may, at any time, be converted to a present value.
The pension liability for ITP 2 consists of three parts:
- Net present value- present value of earned rights.
- Funds for pension supplements- a reserve that enhances the capital value.
- Special indexation funds- an additional provision for indexation.
Net present value- the majority of pension liability
The net present value is determined by every individual. The calculation is based on age, income, pension age, gender and an estimated remaining life expectancy. The current life expectancy assumptions state that the remaining life expectancy for a 65-year-old woman is 24.8 years and for a 65-year-old man, 23 years.
During the discounting of future payments, PRI Pensionsgaranti will use an interest rate of 4%. An addition for future payments is added by reducing the discount rate. After this deduction, the rate of interest is 3.84%.
The capital value is the largest part of your company’s pension liability.
Funds for pension supplements- strengthens capital value
A provision in addition to the capital value gives your company the opportunity to include inflation in pensions when the employee has retired.
Fund for pension supplements is calculated as a percentage of the capital value, currently 4%.
Special indexation funds- established by the parties
This part of the pension liability is calculated collectively for the whole of your company. The funds may only be used with an agreement between the Confederation of Swedish Enterprise and PTK.