In Switzerland there are around 1’300 pension funds managing total assets of CHF 1’129 billion (2023). To simplify administration, many employers rely on collective pension funds. However, this trend towards standardisation raises a number of questions about companies’ ability to offer pension solutions that are attractive to their employees and appealing when recruiting new talent.

In an increasingly competitive labour market, companies can no longer afford to view occupational pensions as a mere legal obligation. At the same time, after years of awareness campaigns, workers have become more conscious of the process of saving for retirement. Since employees are a critical factor in a company’s success, staff selection must be careful. A well-designed pension plan therefore becomes a strategic tool in the company’s hands for maintaining a high level of motivation and loyalty among its employees.

Occupational pensions as a tool for attracting the new generations

The new generations of workers place increasing value on aspects such as flexibility and the possibility of remote working or part-time work. For them, salary is no longer the only criterion when assessing a job opportunity. Indeed, among the decisive factors that lead a candidate to prefer one company over another, the quality of the pension plan offered and the related pension fund benefits stands out strongly.

Not all pension funds are the same, which is why individuals should do their research during negotiations and find out about the pension and insurance aspects offered by the employer and by the pension institution to which it is affiliated. They also need to be able to read and interpret the conditions provided in order to clearly identify the solution on offer.

The legal framework: the BVG/LPP as the basis, supplementary benefits as the lever

The Federal Act on Occupational Old-Age, Survivors’ and Invalidity Pension Provision (BVG/LPP) lays down mandatory rules for so-called “basic provision”, which constitute the minimum level every employer must comply with. However, if they so wish and can afford it, employers may establish a more generous pension plan, provided it complies with the statutory minimum requirements.

Offering employees a pension plan that goes beyond the minimum benefits set by the BVG/LPP is a significant competitive advantage for the employer, increasing its attractiveness on the labour market.

Given the complexity of the subject, it is always advisable to turn to occupational pension specialists for personalised, targeted advice.

Key questions for implementing successful company pension cover

• Which type of pension institution should be chosen: full insurance or an autonomous/semi-autonomous foundation?
  • Full insurance:

With full-insurance solutions, all risks (investment, death, disability and longevity) are fully covered by the insurer.
The main feature of this type of pension fund is the maximum security offered to insured persons, as the insurance company fully guarantees the retirement assets, always maintaining a funding ratio of 100% or more.
Retirement assets are invested with a prudent approach, aimed at preserving capital and achieving returns consistent with a low risk profile.

• • (Semi-)autonomous foundations:

In semi-autonomous pension funds, the risks of death and disability are entrusted to an external insurer, while investment risk is managed directly by the pension foundation.
The foundation invests the retirement assets on the financial markets, allowing insured persons to benefit directly from the results achieved. The investment strategy adopted aims to offer attractive return opportunities over the long term. However, this approach does not guarantee absolute security of capital and entails a funding ratio that may vary over time. To protect assets and manage financial fluctuations, the foundation builds up dedicated fluctuation reserves.

• Will the pension plan guarantee only the mandatory benefits required by the BVG/LPP, or will it be possible to implement a more favourable plan with more generous extra-mandatory benefits for employees?
• Does the coordination deduction take account of the situation of part-time workers by calculating it proportionally to the level of employment, or does it apply a standard deduction that could disadvantage them?
• Retirement credits build up savings over the years. Do they reflect the BVG/LPP minimum, or are higher contributions provided for, allowing greater growth of the capital saved over time?
• Does the pension plan you wish to implement provide for a more generous employer contribution?
  The law requires the employer to pay at least 50% of total BVG/LPP contributions; if the employer so wishes, it can pay a larger share.
• Is it appropriate to adopt customised solutions for the different company profiles?
  Within the same pension foundation, several plans can be set up to insure different groups of staff, such as executives, managers and employees.
• How are benefits structured in the event of the disability and death risks?
  Protecting the worker and their family is a fundamental aspect should an insured risk occur.
• To whom are benefits paid in the event of death?
  Often a cohabiting partner is not recognised as a beneficiary by the pension regulations; it is therefore important to check the circle of beneficiaries of risk benefits in advance.
• What remuneration model does the pension institution you intend to join provide? Do you want to opt for security at all costs and settle for a low return, or would you prefer a more dynamic model that can offer financial returns in line with capital market performance?
  The remuneration of retirement assets is a crucial factor for the growth of your pension savings over the long term. It is therefore important to monitor a pension fund’s funding ratio, in particular through its degree of financial soundness and its policy for allocating fluctuation reserves.
• What conversion rate does the pension foundation apply to convert the accumulated capital into a retirement pension, and what trend can be expected in the future?
  The projection of retirement assets shows the benefit at the reference age and in the event of early retirement.
• Are the administrative costs charged by the pension institution competitive and in line with those offered on the market? Has a comparison of rates with those of competitors been made?
  The administrative costs charged by the foundation are a further element of assessment.
• The level of information and transparency offered by the expert (insurer or insurance broker) is essential for obtaining a quality service. Does the partner you choose to implement affiliation to a pension institution guarantee, now and in the future, all the necessary assistance to provide the employer and employees with the relevant information on the pension plan?
• And many more…

These questions are just some of the fundamental assessments to be made when defining a company pension plan. It is clear how numerous and complex the factors to be taken into account are. That is why occupational pensions are an important component for employers who want to stand out through unconventional, forward-looking remuneration models. An attractive pension offering is a distinctive feature for an employer who, in addition to improving employee well-being, wants to create competitive insurance conditions that help to strengthen the company’s image and attract new talent.

A company that takes care of occupational pension matters demonstrates its commitment to its employees in concrete terms and tends to create a sense of mutual trust and loyalty.

Assidu SA, an insurance broker specialising in employee insurance, plays a key role in supporting companies through a targeted advisory process aimed at building a tailor-made pension plan. For this reason, we invite you to approach this subject carefully, making use of our specialist advice to identify the pension plan that is most effective and best suited to your needs.

Article written by:

Diana De Luca

Retirement planning specialist*Insurance intermediary VBV/AFA*