It is well known that 1e pension plans have many advantages. In the following article, we would like to step forward and give an insight into the design of such 1e plans. This is done after a milestone has been reached. Since January 1, 2020, the finpension 1e Collective Foundation managed by finpension has had over 100 affiliated companies with around 1,000 insured persons. For the evaluation, 109 companies with 133 pension plans were considered. Bonus plans were not included in the evaluation, as they are often subject to different laws.
Management Summary
- Only 16 % of pension plans start at the age of 18, the majority at 25.
- A large proportion of the plans examined make full use of the statutory savings potential (25% savings contribution of between CHF 132,300 and 882,000).
- 70 % of the plans have a single savings contribution rate for all age categories.
- The employers pay a larger share of the risk costs than of the savings contributions.
- The insured risk wage is more likely to be capped than the savings wage.
- More than half of the plans have defined a minimum insured salary.
Start of the savings process and risk insurance
21 of the pension plans begin to take effect at the age of 18, 112 at the age of 25. Why this is the case, is easy to explain: In its minimum requirements for the BVG obligation, the legislator stipulates that the savings process does not begin until the age of 25. Many pension funds also orient themselves to this. Only a few reduce the entry age for savings contributions to 18 years. If a 1e plan is now set up for wages above 132,300 francs, the regulation is usually taken over from the basic fund.
In contrast to the basic plan, where risk insurance generally begins at the age of 18, the 1e plan does not generally differentiate between the age at which savings and risk coverage begin. Both start at either 18 or 25 years of age, exceptionally also in between (2 cases at 20 years).
Level of the savings contributions
In 94 out of 133 pension plans, the savings contributions are linear, which means that the contribution rates are the same for all age categories. More than half of these pension plans have a savings contribution of 25 %(employer and employee together), which is the legal maximum.
The remaining 39 plans do not have a common savings contribution rate. The range is from 7 % to 25 %, the average of 12 % in the 25-34 category to 20 % in the 55-65 category. With staggered savings contributions, rates of >25 % would also be permitted, since the statutory maximum of 25 % must generally only be observed on average (subject to tax law assessment).
| 25-34 | 35-44 | 45-54 | 55-65 | |
| Lowest value | 7% | 9% | 11% | 12% |
| Mean value | 12% | 14% | 18% | 20% |
| Highest value | 22% | 22% | 25% | 25% |
Employee share of savings and risk contributions
The law requires the employer to pay at least 50 % of the savings and risk contributions. In the case of savings contributions, two-thirds of employers go further and pay a larger share of the savings contributions. The employee only needs to pay 40, 33, 25 or 20 %. In one-third of the plans examined, contributions are financed equally; employer and employee both pay the same amount, 50 % each.
The employers pay a little more in risk contributions. Almost a third of employers bear the entire risk costs. In an equal number of plans, the split is 50 / 50, with the rest divided between common values.
The fact that employers pay a higher share of the risk contributions can be explained by the fact that the risk contributions are much lower in relation to the savings contributions.
Legal restrictions on election plans
If the employee can choose from different plans, this is called an election plan. In these election plans, the employee’s savings contribution rates vary. However, the employer’s savings contribution must always be the same within a collective.
A collective must be defined by objective criteria, for example by the management level, the function, the amount of the salary or the age. The employer can offer a maximum of three election plans per collective. The combined savings contributions of the employer and employee in the “smallest” plan may not be less than two-thirds of the savings contributions in the “largest” plan.
Plan minimum and maximum
It gets a little tedious with the plan limits. A very large majority are guided by the statutory plan limits of at least 132,300 and a maximum of 882,000 Swiss francs. 71 % of the plans apply to salaries between 132,300 and 882,000 francs. They thus make full use of the statutory (tax) savings potential.
| Saving | |
| Share of pension plans with plan minimum of CHF 132,300 | 78 % |
| Share of pension plans with plan maximum of CHF 882,000 | 88 % |
| Share with plan minimum of CHF 132,300 and plan maximum of CHF 882,000 | 71 % |
The situation is slightly different for risk, which is due to the fact that the risk salary is limited more often than for saving. This is related to the fact that the benefits of risk insurance decrease with increasing income..
| Risk | |
| Share of pension plans with plan minimum of CHF 132,300 | 78 % |
| Share of pension plans with plan maximum of CHF 882,000 | 74 % |
| Share with plan minimum of CHF 132,300 and plan maximum of CHF 882,000 | 61 % |
Minimum insured wage
If the eligibility criteria for the 1e plan are met, the question arises as to the minimum amount of salary to be insured. Why this question is important: As a rule, 1e foundations have administration fees per member per year. Without a minimum insured salary, there may be an unfavourable ratio of costs to contributions. In extreme cases, the contributions (savings and risk) may be lower than the annual lump sum. Example: Wage 132,500 – coordination deduction 132,300 = 200 Swiss francs insured salary
- Saving Contributions 20 % x 200 = 40 Swiss francs
- Risk Contributions 1.5 % x 200 = 3 Swiss francs
- Administration flat rate = 100 Swiss francs
- Total Cost = 143 Swiss francs
This can be counteracted by a minimum insured wage. The minimum insured wage is applied when the entry threshold is exceeded. In 47 % of the plans examined, a minimum insured wage is defined at the level of the minimum AHV pension of CHF 14,340. A further 9 % have used the minimum insured salary of CHF 3,585 for the BVG compulsory pension plan. Over 40 % of the plans do not provide for a minimum insured salary.
The finpension 1e Collective Foundation charges an administration fee of CHF 100 per insured person. Other collective foundations charge considerably more, for example 350 or 500 francs.
We will be happy to put together a fully individualized pension plan tailored to your existing pension plan and offer it to you together with a cost-effective and withholding tax-optimized investment solution. After all, the investment side should not be neglected when assessing a 1e solution.