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Choosing the right pension fund gives your company a lot of advantages: It cuts down on administration tasks, saves you money and makes your workplace more attractive. But how do you choose the best one for your company? What should you look for when switching pension funds?We answer the most frequently asked questions about selecting a pension fund and provide you with a checklist so switching is a breeze.
Employers are required to join a pension fund when:
In this case, the company is required to join a registered occupational benefits institution. You can find more information in the Federal Law on Occupational Old Age, Survivors’ and Invalidity Pension Provision (Occupational Pensions Act) (currently not available in english).
The purpose of Switzerland’s three-pillar social security system is to ensure that people living in Switzerland are financially secure in their old age and in the event of disability or death. The second pillar of the Swiss social security system consists of occupational benefits insurance, which is often simply referred to as a “pension fund.” Together with the first pillar, it aims to provide a pension income of about 60 percent of an employee’s final salary before retirement.
Employers can pay in more than the legal minimum requirements so their employees will receive better benefits for death and disability and/or retirement. Want to know how far your retirement savings and those of your employees will go? Then have one or our AXA experts take a look at your current retirement plan and insurances.
As the purpose of a pension fund is to supplement the basic insurance provided by Pillar 1 (AHV/OASI), it plays a vital role for everyone. The aim of occupational benefits insurance is for everyone to maintain their accustomed standard of living in their old age, and as such it is a valuable social aspect of our society.
Joining a pension fund is also a good idea for people who do not have mandatory insurance, such as the self-employed or part-time employees whose salary does not meet the BVG/OPA minimum. Although these employees are not required to have mandatory occupational benefits insurance, if they meet certain conditions, they can join if they like. Are you self-employed? Take our free insurance check to find out whether joining a pension fund is worth it for you.
According to the Swiss Federal Statistical Office, there are some 1,390 occupational benefits institutions in Switzerland. They can be divided into two different types. Collective foundations are open to all companies and their employees. Company-owned pension funds only insure the people who are employed by that company.
The number of pension funds used to be much higher. The past few years have seen quite a few consolidations owing to increased regulations and technical requirements. Synergies in administration and costs as well as the need for additional know-how have led to liquidations, particularly among company-owned pension funds.
Employers are required to offer their employees a retirement plan, which is subject to review by the AHV/OASI office. A company has the following choices:
If a company that is not yet affiliated with any pension fund wishes to join an existing pension fund, the employees can choose the pension fund. In order to leave one pension fund to join another, employers must obtain consent from their employees or the employee representative committee. The company must join a pension fund that is registered under occupational benefits insurance.
Trade organizations often have their own pension fund that is geared to the specific needs of its members. Oftentimes they also offer pensions for self-employed people who don’t have any employees. There are also associations that offer specific solutions in a collective foundation exclusively for their members.During the consultation, an association member must be made aware of any existing internal solutions as well as any consequences if they decide not to join. Apart from this, every company is free to choose to join another pension fund.
The employer must join within two months after their duty to join a pension fund begins.If you as the employer do not do this, the compensation fund office will retroactively register you with the Substitute Occupational Benefit Institution.If you do not join a pension fund or ignore the registration check, you are committing a criminal offense.
If you are looking for a pension fund for your employees, you have the choice between a full insurance foundation and a semi-autonomous solution.
A full insurance foundation
Semi-autonomous solutions are another option:
There is no official quality rating for pension funds. The interest group for autonomous collection and joint foundations, inter-pension, offers helpful information about the quality of pension funds. It advocates for independent retirement solutions and provides a pension fund overview with key figures. Various newspapers and trade journals such as Penso (currently not available in english) publish an annual pension fund rating. These ratings make comparisons between regular key figures such as investment returns, interest payments and the lowest risk and administration costs.
Employers can switch pension funds if they have the consent of employees or the employee representative committee. Employers are responsible for ensuring the switch is made correctly.
The process starts with the evaluation phase. The company examines questions such as, “What do we need? Which pension funds are currently fully funded? Which ones are we not interested in?” Based on this analysis of your needs, the second step is to pre-select pension funds and obtain offersfrom them. Next comes the comparison phase. As this decision will also affect their employees’ insurance, companies generally hire pension experts to help them with the switch. These experts will manage the complex process and ensure that the company’s needs are covered with a leading-edge pension fund solution that boosts the company’s attractiveness.
Are you looking to change pension funds? Our pension experts will be glad to assist with support and advice.
As long as you comply with the contractual notice period, your company can switch pension funds as often as you like. However, this might cost you time and money. Pension funds consider the composition of their pool of insureds (e.g. age structure). This affects new members in particular. Companies that have a larger number of older employees are therefore at a disadvantage if they want to switch. Apart from the Substitute Occupational Benefit Institution, pension funds are not required to accept anyone that applies.
The process lasts several months. One of the reasons it takes so long is because employees have the right to participate in the decision-making process. Another reason is that the employer must provide detailed documentation regarding the process, all of the terms, and the declaration of consent from staff or the employee representative committee.
As employees have the right to participate in the decision-making process, they must be involved throughout the entire process of the pension fund selection. The switchover and approval for the related conditions are decided in tandem. Without employee approval, the cancellation and switch are not valid. The ceding pension fund is required to check whether these criteria have been met.
More detailed information on the ruling by the Federal Supreme Court on May 5, 2020, regarding switching to a different pension fund can be found in the article, “Switching to a different pension fund – what do you need to be aware of?” by MyRight.
Which pension fund will work for my company? Is it worth switching? We have drawn up a checklist to help you out.
Which pension fund solution is right for a company depends on various factors. Consider your company’s internal criteria when making your choice:
Incidentally, this blog article tells you more about the aspects and key figures for assessing pension funds.
Selecting a pension fund is needs-based and every company will have different priorities. Ask yourself the following questions regarding retirement pensions:
These six tips will make the process easier for you:
Nadine Graf is a theme manager and writes texts for AXA on topics related to insurance and beyond.
