Occupational Pension Scheme

Statutory obligation (Obligatorium)

Mandatory insurance

• Persons insured in the old age and survivors’ insurance scheme, i.e. persons with employment in Switzerland.
• Employed persons starting from 24 (age 17 for the risks of death and invalidity) who earn more than an annual salary of CHF 21,330 with one employer. In accordance with the scheme’s goal as coordinated¹ with the old age and survivors’ insurance scheme, the insured part of the annual earned income is CHF 24,885 to CHF 85,320.
• Special rules set by the Federal Council apply to employed persons in professions with frequently changing or fixed-term employment.

Opting in

• Self-employed persons belonging to certain groups of professions may, upon request by their professional association, be subject to the statutory obligation in general or for specific risks, provided that the majority of self-employed persons in the respective profession are part of the association. This legal possibility currently has no practical relevance.

Exempted

Among others:

• Employed persons whose employer is not obliged to pay contributions for the old age and survivors’ insurance scheme.
• Employed persons with a fixed-term employment of three months at most (with exceptions).
• Employed persons in a side job who are already mandatorily insured in their main job, or are self-employed in their main job.
• Persons with a degree of invalidity of a minimum of 70% according to the invalidity insurance.
• Employed persons who are not or will presumably not always be in employment in Switzerland, and are sufficiently insured abroad, may request to be exempted.

Voluntary insurance

• Employed and self-employed persons who are not insured in the statutory obligation may generally enter the statutory obligation on a voluntary basis. The same conditions as in the statutory obligation generally apply.

Supplementary component  (Überobligatorium, weitergehende Vorsorge)

Voluntary insurance

• Refers to the insurance above the statutory minimum (Überobligatorium), i.e. the insurance of earned income that exceeds the maximally allowed annual earned income of the statutory obligation (CHF 85,320). Pension funds may offer this component voluntarily, and persons with the corresponding income may choose to insure it voluntarily.
• Self-employed persons may choose to enter solely the supplementary component, skipping the statutory obligation.

General finances

• Fully funded personal pension plans based on contribution payments (by the insured and their employers) and capital revenues.
• No government guarantees or state subsidies.
• Pension funds are subject to legal regulations regarding the investments of contribution payments. The Federal Council sets a minimum interest rate for the old age savings in the statutory obligation.
• To a minor extent, recourse claims and liability claims.

Contribution payments

• Contributions shared between employers and employees. No specific amount of contributions set by law, rates are defined in each pension fund’s regulations. Employers are obliged to pay contributions at least equal in amount to the total of all employees’ contributions at a given time.

Taxation of contribution payments

• Tax exemptions for all contributions (and saved assets). This privileged status also applies to contributions to the supplementary component.

State support & incentivising strategies

• Contribution payments as well as the entirety of savings accumulated through contributions are fully tax-exempted. This privileged status also applies to contributions to the supplementary component.

• Private and public pension funds that administer the statutory obligation are registered with the supervisory authority and fulfil the related requirements. While they lack the authority to issue binding administrative decisions, they enjoy some freedom regarding the composition of their insurance, benefits, financing and organisation, so long as they regard the minimum standards set by law.
• Pension funds are supervised by the cantons, which are in turn supervised by the supreme supervisory committee (Oberaufsichtskommission) of the Federal Council.
• Employers are responsible for their employees’ occupational pensions and owe the pension funds both portions of the contribution (deducted from the employee’s salary). They may establish their own pension fund for their own company and register it with authorities. Alternatively (e.g. due to high costs or low number of employees), they may join existing multi-employer funds (Gemeinschaftsstiftungen) or collective funds (Sammelstiftungen) by entering into an affiliation contract (Anschlussvertrag). Multi-employer funds are pension funds in which a single fund is maintained with its own regulations for every employer (also called a Vorsorgewerk). They are usually established by and closely associated with financial institutions despite being legally independent entities. In collective funds, the conditions and organisations are the same for all the employers who are members. They are usually founded by professional associations.
• Self-employed persons may insure themselves voluntarily with the occupational pension fund run by their professional association. If that is not possible, they may join the Substitute Occupational Benefit Institution.
• The Substitute Occupational Benefit Institution (Auffangeinrichtung) is a collective pension fund that takes in persons who, for various reasons, have not joined other pension funds (e.g. when employers have failed to meet their duty to join a fund); who want to join the statutory obligation voluntarily (e.g. self-employed persons); who are not permitted to join another pension fund (recipients of a daily allowance from the unemployment insurance); or who do not wish to join another pension fund (voluntary membership on the part of the employer in this fund).
• The Guarantee Fund is a kind of legally dictated reinsurance scheme for everyone in the occupational pension scheme. In the case of insolvency of a pension fund, it guarantees not only the statutory benefits, but also, to a limited extent, the additional benefits stipulated in the fund’s regulations.  Furthermore, to the extent stipulated by law, it pays subsidies to the pension funds that have an unfavourable age structure, and also performs numerous other tasks. It is financed by the affiliated pension funds.
• The Substitute Occupational Benefit Institution and the Guarantee Fund are supervised by the Federal Social Insurance Office (BSV).
• Pension funds that solely pay out benefits in the supplementary component, that is above the insured income of CHF 85,320, are not subject to the Federal Act on the Occupational Old Age, Survivors’ and Invalidity Pension Insurance Scheme. Regulations vary accordingly.

• The retirement age is the same as in the old age and survivors’ insurance scheme (64 for women, 65 for men).
• Pension funds are not required by law to allow a premature payout of benefits, but may offer such options in their pension regulations from age 58 onwards, e.g. premature retirement once employment has ended, partial retirement by way of workload reduction etc. A premature payout results in lifelong reductions of the pension, often 5-7% per premature year, in the form of a lower conversion rate.

Pension benefits/payments

• Benefits are calculated by a percentage of the old age savings of the occupational pension scheme (so-called conversion rate). The minimum conversion rate for the regular retirement age is 6.8%. Old age savings consist, among other things, of the entirety of old age assets a person has accumulated through contributions by the time of retirement, including capital revenue, and assets accumulated in and transferred by previous pension funds (e.g. after job changes).
• Old age assets are calculated annually in percentages of the coordinated salary: 7% between age 25 and 34, 10% between age 35 and 44, 15% between age 45 and 54, 18% between age 55 and 64 (women) or 65 (men).
• Benefits are usually paid as a life-long pension on a monthly basis. On request, ¼ of the relevant old age savings may be paid out as a one-time lump sum. The pension fund itself may choose to pay out benefits as a lump sum if the old age benefit is less than 10% of the minimum amount of the old age benefits from the old age and survivors’ insurance scheme. Other options are possible according to the regulations of the respective pension fund.
• Old age savings, in part or in full, may be paid out prematurely for specific reasons, with corresponding reductions of the later benefits claim. Reasons include commencement of self-employment as a main job, permanent emigration (not including countries of the EU and EFTA), and the acquisition of resident property for one’s own use.

Taxation and social security contributions:

• Pensions are generally fully subject to income tax according to general tax rules. Lump sums are taxed at a reduced rate separate from the remaining income; the same applies to prematurely paid-out lump sums for specific reasons.
• Pension payments are not subject to social security contributions.