In usual management benefit plans, all savings are invested jointly by the pension fund for all employees. 1e management plans differ from ordinary management benefit plans in this respect. In 1e plans, the insured person chooses the investment strategy for his or her pension assets. The insured person can choose the investment strategy that best suits their personal situation. The pension fund commission can offer up to ten different investment strategies for the insured to choose from. By law, one of these must be low-risk.
Numerous advantages of 1e plans
Protection from redistribution
A big advantage of 1e plans is the protection against redistribution. The insured persons are fully credited with their returns. Nothing is diverted to finance excessive pension promises from the BVG mandatory plan. Moreover, with a 1e plan, a company can position itself as an attractive employer for the next generation of employees. It provides the recruiting department with a sales argument that will help your company to differentiate itself from others on the job market.
Restructuring risks are no longer an issue
The pension institution does not have to guarantee a minimum vested benefit. Members of 1e plans must bear any losses themselves. Accordingly, it is not possible for the collective foundation to run into a shortfall in cover. Restructuring risks for the affiliated companies and their insured persons are completely eliminated for the salaries insured under the 1e plan. The balance sheet can be relieved of pension obligations by introducing a 1e plan, which increases the equity ratio and results in a better rating (IFRS or US-GAAP accounting).
Purchasing potential can be increased
1e plans start with a salary of 132’300 Swiss francs. The upper salary limit is 882’000 Swiss francs. This translates into a maximum of CHF 749’700 in salary components that can be insured. Depending on the type of pension solution you have had so far, you are able to significantly increase your purchasing potential with a 1e plan. These voluntary purchases are very popular with the insured in order to save taxes. Since there is no possibility of redistributing pension assets from active members to pensioners, purchases in 1e plans are much more attractive than in conventional pension fund solutions.
Lower risk costs thanks to low-risk collective
The probability that insured persons in 1e plans will receive benefits for the risks of death or disability before retirement is significantly lower than in the BVG mandatory plan. The risk premiums are consequently often significantly lower than for normal pension funds.
PS: The insurance principle must be observed with 1e plans as well. At least 4 percent of total premiums must be used to insure the risks of death and disability.