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Is my pension fund safe?

For many households in Switzerland, pension fund assets make up the largest proportion of total assets. A study of more than 3,000 households by the Wealth Centre shows that, on average, 57% of a household's assets are held in the pension fund. For respondents who own their own home, pension assets still account for a good third. The question of the security of the pension fund is therefore an important one. How can you recognise whether the pension assets in the pension fund are secure? We have summarised a few points that can provide information about the 'health' of a pension fund:

By Stephanie Cuche, Taxes and Financial Planning 01. May 2023 back
  1. The coverage ratio shows the relationship between the pension assets and the financial obligations of the fund. If the coverage ratio is above 100 %, this indicates that the institution has a healthy cushion. Below 100 %, there is a risk that the pension fund will have to be reorganised and the insured persons will have to contribute to this.
  2. The technical interest rate is set by the Board of Trustees of a pension fund. It is used to discount the pension capital on the basis of expected future income and reserve it for pension benefits. The technical interest rate should therefore only be high enough to be financed by the investment income. If the technical interest rate is 2% or higher and the funding ratio is not particularly good, this is not a good sign. Such a pension fund is dependent on higher investment income in order to cover its obligations. Conversely, a low technical interest rate speaks in favour of a conservative pension fund.
  3. The ratio of active insured persons to pensioners is good if the proportion of pensioners is rather low. A 'young' pension fund can take higher risks when investing assets and generate a higher return.

It must be said, however, that the amount of the pension is guaranteed for life at the time of retirement. At present, pensioners cannot be obliged to take pension fund restructuring measures. Only possible adjustments to inflation can be cancelled in the event of underfunding.

Should the worst-case scenario materialise and a pension fund becomes insolvent, the Guarantee Fund comes into play. The LOB Guarantee Fund Foundation is a national occupational benefits institution whose main purpose is to protect pension assets in the event of insolvency. It safeguards the claims arising from statutory benefits, but also the regulatory benefits that go beyond these. These non-mandatory benefits have an upper limit, which is based on the relevant or insured salary. The upper limit is currently set at CHF 129,060.

Sources

Wealth Centre,
www.vermoegenszentrum.ch/wissen/kuemmern-sie-sich-aktiv-um-ihr-vermoegen-der-pensionskasse

Occupational Pension Supervisory Commission OAK BV
www.oak-bv.admin.ch/de/beaufsichtigte/sicherheitsfonds-bvg

LOB Guarantee Fund Foundation
sfbvg.ch/index.php

Koeppel-Legal
www.koeppel-legal.ch/wie-gut-ist-meine-pensionskasse/