Occupational pensions:
Find the best solution here
Felix Steiger
Director, Assurance, PwC Switzerland
Jan Koller
Director, People & Organisation, PwC Switzerland
The structure of the occupational benefit scheme for in-house staff has a significant impact on employers. The chosen model must fit the company and keep pace with its development. Then an employer can not only offer pension cover, but also retain employees in the long term and attract qualified young talent. Those who set up their pension scheme intelligently contribute to the successful and sustainable development of the company.
High minimum requirements
According to the Federal Social Insurance Office, occupational pension provision as the second pillar is intended to enable insured persons to maintain their current standard of living in addition to AHV/IV/EL. The Federal Law on Occupational Retirement, Survivors' and Disability Pension Plans (BVG) has defined the statutory minimum of the second pillar since 1985. Among other things, it limits pension cover to a maximum salary of CHF 88,200 and defines fixed age-dependent contribution rates (retirement credits) that increase with age. The BVG minimum conversion rate is currently 6.8 per cent. The interest rate on retirement assets under the BVG is set annually by the Federal Council and amounts to 1.25 per cent for 2024. Employers must ensure that their occupational benefit scheme at least meets the BVG requirements.
Making targeted use of room for manoeuvre
Above and beyond the statutory minimum, there is a great deal of leeway in terms of the scope and manner in which pension provision is organised. The following five fundamental questions arise for those responsible:
- Should the pension plan cover the statutory minimum (BVG) or be more generous?
- Does the company insure all employees in a standardised pension plan or does it define different plans?
- Do you operate your own pension fund or do you join a collective or joint scheme?
- Does your own pension fund carry out all activities itself or do you work with outsourcing partners?
- Does the pension fund bear all the risks itself or do you take out additional protection by taking out reinsurance?
These questions serve as a compass for the employer when designing and regularly reviewing the chosen pension solution. The ideal pension solution is the one that best suits the company. How such an identification process can work is explained below using two anonymised practical examples.
Example 1: Out of full insurance, into the collective foundation
- Background: When the company was founded, those responsible designed the pension solution as a BVG minimum solution for financial reasons. As they also lack the necessary expertise to implement the occupational benefit scheme, the company joins a full insurance company.
- Motivation: Business is going well and the workforce is growing. The company is developing into a successful employer. So those responsible want to take the implementation of the pension scheme into their own hands.
- Solution: After a lengthy analysis and evaluation phase, the employer cancels his full insurance solution and joins a collective institution with its own pension fund.
- Advantages: Those responsible are now more flexible when it comes to co-designing the occupational benefit scheme, particularly with regard to the selection of investments. This influence was excluded in the context of full insurance. And: if the financial markets develop favourably, a higher interest rate on retirement assets is possible.
- Challenges: Selecting the collection centre that best meets the company's needs is challenging. In addition, the company must now bear the investment risks itself.
Example 2: Modernising a historically evolved pension solution
- Background: The company has its own pension fund, a separate management fund and a welfare fund. The purpose of the latter is to promote the welfare of employees. This form of occupational pension scheme has grown over many years.
- Motivation: Those responsible consider the pension solution to be unnecessarily complicated and outdated. They would like to simplify and modernise it.
- Solution: The company liquidates the management fund and the welfare fund and transfers these assets to the pension fund. It also develops a new and attractive pension plan with special components ("1e plan") for executives and management.
- Advantages: Employers benefit from significantly simpler administration, as they only have to maintain one pension scheme. Overall, it has simplified the pension scheme: the insured persons are no longer insured in several pension schemes of the same employer, but their needs are covered by one large pension plan.
- Challenges: Defining such a pension plan requires a great deal of expertise. The company must ensure that the pension scheme makes a valuable contribution to the market-driven remuneration of the insured. The formal legal aspects of dissolving the previous management and welfare foundation are complex.
Conclusion
Organising occupational benefits is anything but trivial for the employer company, as numerous models are conceivable. A company should see this diversity as an opportunity and therefore as potential that it can utilise in favour of holistic and long-term corporate development. The prerequisite for this is that those responsible regularly review the in-house pension solution and make the necessary adjustments where necessary. It is worth calling on the expertise of external pension professionals and exploring possible alternatives.
