In the ‘old’ Länder, insured employees and participating employers still finance VBLklassik with premiums on a pay-as-you-go basis: as is the case with state pension insurance, premiums paid by the employers and employees to the scheme are used to fund payments to pensioners that year. When the insured employees will have reached the retirement age themselves, their pensions will be funded by the premiums paid by the insured employees at this future point of time.With the reform of the supplementary pension in 2001, the parties to the collective labour agreements and the VBL agreed to also operate VBLklassik as a capital-funded scheme in the long term. The new Länder started to operate the compulsory VBLklassik with capital funding back in 2004.
With the new supplementary pension arrangements, employers and unions also created the basis for an additional voluntary occupational pension from VBL. With VBL’s voluntary pension insurance, insured employees can plan for a better standard of living in retirement by making voluntary contributions. The VBLextra voluntary occupational pension schemes is capital-funded.