Pensions are falling - what entrepreneurs can do now

The current pension promises can hardly be financed within the valid framework conditions. The main reasons are the still increasing life expectancy and the decreasing investment returns. The result is a gigantic redistribution within the 2nd pillar of several billion francs annually.

No quick political solution in sight

Like the AHV, the occupational pension scheme (BVG) also needs to be reformed. The social partners presented a compromise in summer 2019. The regulations of the 2nd pillar are to be revised as follows:

• Reduction of the minimum conversion rate from 6.8 to 6.0 percent
• Lifelong monthly supplement for all future BVG pensioners, for 15 years after the revision comes into force
• This surcharge is financed on a parity basis via 0.5 wage percentages
• Halving of the coordination deduction
• Only two retirement credits/simplification of payroll deductions (9 percent from age 25-44, 14 percent from age 45).
• The subsidies for pension plans with unfavorable age structures are eliminated
• Introduction of a contribution to finance the pension conversion guarantee

The bill is currently in the consultation phase. However, the resistance of various organizations and parties is so great that a quick political solution cannot be expected. This means that without concrete measures, billions of pension assets will continue to be redistributed from active employees to pensioners.

Skills shortage forces action

The shortage of skilled workers has become more acute in many sectors. This is prompting companies to review their employment conditions, including salary and fringe benefits, in order to make themselves more attractive on the labor market in these areas as well. Pension benefits are becoming increasingly important, as many applicants now view and value them as a direct component of their salary. It is not only the amount of the savings contribution or the definition of the risk benefits that play a role. The expected investment income or tax aspects are also taken into account.

Entrepreneurs become active now

Redistribution is also extremely disruptive from a purely business perspective. Blatant discrimination against current employees has a negative impact on the motivation of the workforce. Knowing that the pension plan in the Swiss Worry Barometer has occupied the top spot for three years, management would do well to take these concerns seriously. Instead of waiting for the lengthy political process, entrepreneurs are now taking action and exploiting the current leeway.

Neutral analysis reveals weaknesses

Funk can show various ways in which entrepreneurs can optimize their pension provision in order to correct current system errors in the long term. The current pension solution is analyzed. Based on the analysis, measures are developed that lead to improvements in costs, benefits and investment income. Tax optimization for the staff can also be a consequence of the measures.

Review of the foundation form

In addition to the full insurance model, semi-autonomous foundations with their options for a pension solution with pooled or individual investments have become very popular in recent years. In the consulting process, entrepreneurs receive transparency on the foundation forms and recognize which pension fund solution is best suited for their company based on the advantages and disadvantages. With the right choice of pension fund provider and foundation form, they can reduce costs and sustainably improve employee benefits.

Election plans offer individual design options for all

The amount of retirement assets at the time of retirement depends largely on the monthly savings contributions made by the employer and the employee. With the introduction of an optional plan, employers (or the pension fund commission) can offer their employees a modern pension plan option in which they can choose from up to three different variants and determine the optimal savings contribution amount. This offers employees a personal design option within the pension scheme, with which they can actively and positively influence the amount of their future retirement assets - and thus their pensions.

An option for cadre employees - the 1e plan

The majority of employed people in Switzerland save most of their assets in their pension fund. For some time now, specialized pension plans have made it possible for insured persons to have a direct say in investment strategies in the extra-mandatory area - provided their annual salary is at least CHF 127,980. The designation "1e plan" is derived from Article 1e in the Ordinance on Occupational Pension Plans (BVV2).

For this group of people, the 1e pension plans offer a number of advantages: The pension assets are completely separated from the remaining retirement assets. Since the majority of the assets are capital insurance (no pension benefits), they no longer have to accept any redistribution effects in this fund. In addition, the insured person is free to choose his or her own investment strategy from up to ten options.

One of the entrepreneurial virtues is the active and solution-oriented approach to problems. In occupational pension provision, there is now an opportunity to demonstrate entrepreneurship for the benefit of the company and its employees.

To the author:
Andreas Jäggi is a member of the management team and has been with Funk since 2010. He has been Head of the Personal Insurance and Occupational Pension Division since 2013. www.funk-gruppe.ch