At its session of 26 August 2020 the Federal Council voted to amend four ordinances governing occupational pensions. These amendments enter into force on 1 October 2020, with the exception of two articles. The Federal Council was acting in the context of financial and actuarial developments and to implement several mandates from parliament.
In our blog post «Amendment of the occupational pension ordinances (Part I)» we looked at the main changes to the Ordinance on the Vesting of Occupational Old Age, Survivors’ and Invalidity Benefits (VBO). This post focuses on the Ordinance on Occupational Old Age, Survivors’ and Invalidity Pension Provision (OPO 2) and the Ordinance on Tax Relief on Contributions to Recognised Pension Schemes (OPO 3). For an explanation of the financing of infrastructure investments, please refer to our blog post «Financing of infrastructure investments in the new OPO2 asset category» (German only).
Ordinance on Occupational Old Age, Survivors’ and Invalidity Pension Provision (OPO 2)
To date, pension funds have had to use 6 % of all contributions to financing benefits for the risk of death and invalidity. In fact, the average has been 6.6 %. This percentage has decreased steadily over recent years due to the decrease of new pension payments in the invalidity insurance; at launch in 2005 it stood at 10%, equivalent to 60 % of the theoretical average premium. To preserve this ratio and avoid pension funds having to hold a disproportionate amount of capital, meaning excessive risk premiums, the Federal Council has now cut the percentage to 4 %. Pension funds now must comply with this across all occupational schemes offered by an employer, not for each plan individually.
Ordinance on Tax Relief on Contributions to Recognised Pension Schemes (OPO 3)
As with the criteria in VBO (see «Amendment of the occupational pension ordinances (Part I)»), under OPO 3 too vested benefit institutions and pillar 3a institutions may now curtail or refuse benefits if the beneficiary has wilfully brought about the death of the person insured.
To date it has only been possible to use pillar 3a assets to make a buy-in to a pension fund if they are released in full. It was not permitted to release only part of the pillar 3a assets. Partial transfer is now possible, provided this covers any gap in pillar 2 in full. Otherwise partial transfer remains prohibited.
The previous wording of Article 3 OPO did not make it unambiguously clear whether transferring pillar 3a assets to another recognised pension scheme to draw a pension once the minimum age (59 for women and 60 for men) has been reached is still permissible. This, and tax-neutral use to make a buy-in to a pension fund, remain permitted until normal retirement age has been reached, and even beyond that where it can be shown that employment continues. These amendments (Articles 3.2b and 3a) will not enter into force until 1 January 2021, unlike all other adaptations.
If the contractually agreed end-date of a pillar 3a policy falls before the earliest date at which a pension can be drawn, it must be transferred to another pillar 3a institution. If maturity falls within the five years before ordinary retirement age, a transfer is no longer possible. The same applies where the person insured remains employed beyond ordinary retirement age. The agreement (if stipulated therein) may be extended before expiry up to five years after ordinary retirement age has been reached if employment continues.
The Federal Council is cutting the percentage of contributions to finance benefits for the risk of death and invalidity from 6 % to 4 %. Pension funds may curtail or refuse benefits if the beneficiary has wilfully brought about the death of the person insured. It is now also possible to use just a part of pillar 3a assets to make a buy-in to a pension fund. In addition, the Federal Council has reworked the wording on transferring these assets to another recognised pension scheme to make it clearer.
