The purpose of the Buffer is to prevent you from retiring with less money than you’ve invested. On top of investing in a risk-averse fund, you have an extra layer of protection against large scale downturns, like a global recession.
It’s likely that you won’t need the protection of the Buffer since the type of investing you’re doing has always turned out profitable in the long run. However, it’s nice to know that you’re relying on something more than luck when your retirement date comes along. If your investments have made an overall loss, the Buffer will reimburse you.
Scenarios at Retirement
If you've made profits
With the highest probability, you'll retire with profits. For example, you’ve contributed €10,000 and it’s grown to €20,000. The money you’ve contributed plus the profits are turned into a retirement income.
Downturns with the Buffer
You’ve deposited a total of €10,000 but a recession has caused your savings value to decrease to €6,000. The Buffer reimburses the loss of €4,000. €10,000 can be turned into a retirement income or payed out as a one time payment.
Downturns without the Buffer
Without the Buffer, the same downturn would leave you with a loss of €4,000 and only 60% of what you’ve contributed. Only €6,000 can be turned into a retirement income.
Every deposit you make towards your Vantik account, minus withdrawals count towards your retirement baseline. This baseline is protected by the Buffer on your selected retirement date.
In case you retire with profits, the baseline and profits can be turned into a retirement income. In case you retire with losses, the value of your investments falls below your retirement baseline, the Buffer will aim to reimburse all the money missing from the baseline.
Protection costs 1% of each deposit. You only pay once per deposit. For example, if you transfer €100 to your Vantik account, €1 is transferred to the Buffer. €99 goes straight into your invested savings but your retirement baseline is raised by the full €100.