Pension funds are again in the public and political spotlight. Hardly surprising, as they’re crucial to the future financial wellbeing of many people in Switzerland. So-called 1e pension plans, which give members greater flexibility in the management of the extra-mandatory portion of their pension contributions, are an important component of the system.
In our latest survey of the 1e market, we help make things more transparent for providers, employers and members by continuing to track developments, investment performance and costs in this growing segment.
We asked 14 multi-employer pension funds (MEPFs) and six company-owned pension funds (CFs) to describe developments in their business. This website goes into some of the findings.
This year we expanded our 1e-survey to not only offering provider perspectives but also exclusive insights from both companies and insured members.
We asked businesses, whether they offer 1e plans or not or whether they foresee to provide one in the future as well as their views on these type of high-earner pensions. Click here to read about the findings of our 1e companies' survey.
Additionally, we partnered with company and multi-employer 1e pension funds to gauge member satisfaction. We explored the perceived advantages and drawbacks of 1e plans, and evaluated how insured members perceive investment risks within these plans. Click here to read about the findings of our 1e insured members' survey
Five key survey findings
The market for high-earner pensions continues to evolve
- The market is not yet saturated. With only 9% of eligible Swiss employees, the majority eligible is not yet insured under a 1e plan.
- However, study shows that the market continuous to grow: There was a 12% increase in employers (+436) and a 14% increase in members (+ 3,058) in surveyed multi-employer funds. This is slower growth than in 2022.
- There are 45,698 total insured members in 1e plans, an estimated 9% of eligible Swiss workers.
- Corporate 1e funds saw a 7% drop in 1e insured members, mainly driven by one bigger 1e CF due to corporate changes.
The market could be in for a phase of consolidation
- With two-thirds of assets under management in the MEPF surveyed held by just four providers, one merger already scheduled for 2025 could be the start of a wave.
- 14 multi-employer funds now hold CHF 6.4 bn of assets, an increase of 19% in 2023; the largest 4 providers manage two-thirds of these assets.
- One new provider entered the market in 2023 and one merger will take place in 2025. This may be the start of further consolidation.
Overly cautious members could be eroding the performance of their investments by choosing more risk-averse strategies
- The average 1e plan member continues to choose arguably more risk-averse investment strategies than the average Swiss pension fund.
- The majority of providers report that most members do make an investment decision but that many follow the default or a lower-risk strategy.
- If 1e plan members had allocated their assets to slightly riskier strategies, returns would have been CHF 174 m higher.
1e plans are under pressure to reduce costs
- The costs at the average 1e MEPF are still higher than at the average collective foundation.
- Average multi-employer fund admin costs are at a similar level to last year, no further cost reduction was achieved – although the range of costs for each provider indicates that lower costs can be achieved.
- Providers will have to continue leveraging scale and technology to make their funds attractive.
Digital transformation is ongoing and customer experience is likely next
- Most multi-employer providers worked to optimise online tools and fully digitise processes in 2023.
- Only 5 out of 14 providers actually measure member satisfaction, which indicates scope for better understanding and improving member experience.
Download the report
The report delves deeper into these findings, offering a detailed view of the 1e landscape, including asset allocation, total expense ratio, and the latest market innovations. Additionally, it provides practical guidance on designing and setting up a 1e plan.
https://pages.pwc.ch/core-asset-page?asset_id=701Vl00000GRBKlIAP&embed=true&lang=en
