Insured salary

First of all, you should check the amount of the insured salary under the second pillar and whether there is an upper limit. If, for instance, your annual salary is CHF 100,000, but the insured salary is only CHF 86,0401¹, this probably means that only the legal minimum defined by the Federal Act on Occupational Old Age, Survivors’ and Invalidity Pension Provision (OPA) applies. However, if the insured salary is identical to the reported salary, you are in a better position to build up capital for your retirement or in the event of invalidity or death.

Mandatory vs voluntary benefits

You can also choose to make voluntary contributions. In this case, the income above CHF 86,0401¹  per year will not be covered by statutory provisions but will be insured under an additional pension fund plan. As a result, the total capital in your second pillar will be higher and therefore lead to a higher pension at retirement compared with mandatory OPA  benefits².

Solid financial management

Pension funds must always guarantee that they can meet their obligations (apart from a few special cases). This is referred to as the funding ratio. If this ratio is 100% or higher, the financial situation of the pension fund is sound. If not, restructuring measures need to be taken. This could result in a lower return than the statutory minimum rate set out in the OPA², or in additional contributions from both employers and employees to cover the shortfall. However, a funding ratio of 100% alone is not enough. The pension fund must also build up sufficient reserves in order to be able to cope with possible negative annual results due to investment fluctuations.

Assessing a pension fund is not easy, and expert advice may be required. The experts of BCGE’s Wealth and Pension Planning Unit can help entrepreneurs assess their own pension fund and help them find ways to optimise it according to their personal objectives and their specific situation.