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Finding your way through the pension jungle

The occupational pension plan (BVG) is part of Switzerland’s three-pillar system and firmly grounded in the federal constitution. As the second pillar, its purpose is to maintain accustomed living standards after retirement. The BVG is essentially obligatory, although the law provides for some exceptions, in particular for the self-employed. 

Must all businesses contribute to a pension plan? 

No, self-employed sole traders are exempt, but may set up their own pension plan on a voluntary basis. Existing credit balances may be paid out in order to establish a company. If an entrepreneur establishes an AG or a GmbH, they are treated as an employee and subject to BVG rules according to their income. 

Can sole proprietors join a pension plan? 

A distinction is made if the company owner employs staff who must pay into an occupational pension plan. If staff are insured through a pension fund, then the company owner is also able to register with the same fund. This option is not available for business owners with no employees; instead a pension fund of their professional or trade body may be available or they can join a national occupational benefits organisation. 

How are the level of contributions decided? 

BGV benefits are financed by salary premiums. Employers must pay at least 50% of these premiums for their employees. Premiums range from 7% to 18% of a person’s income, depending on sex and age (the older, the higher the premium). Depending also on the options offered by a pension fund, there is some latitude in the level of contributions and in the proportion of the risk and savings portion. This configuration is then applicable to all employees in the company. 

From which payroll are the first contributions due? A person is obliged to pay into a pension plan if they earn more than CHF 21,060 (as of 2013) annually. The mandatory insured salary is limited to a maximum of CHF 83,520. 

Outside this range, companies can arrange insurance for their employees at their own discretion. 

How do I find the right pension fund for my business? 

Fund options vary greatly, particularly in their flexibility in terms of the size of contributions. It is also worth looking out for fees that may accrue from administrative expenses. These can differ hugely. Always seek individual advice before making a decision. It is also worth comparing several different pension fund solutions. 

It is the responsibility of every business owner and self-employed person to gain some basic knowledge about pension funds. The objective should always be to ensure the most appropriate and ideal retirement solution for you and your staff. The pension fund benefits offered by a company can determine whether someone joins the firm or not.