Which pension fund solution for employee pension benefits?

In Switzerland, companies are affiliated to pension funds under the Federal Law on Occupational Benefits (LPP/BVG), so that their employees can maintain their previous standard of living once they reach retirement. Switzerland has some 1,400 pension funds active in the second pillar, which can be classified into several types.

The figure: 98% of companies in Switzerland are affiliated to a collective foundation-type pension scheme.

As a company, it's important to choose the right structure for your employees' occupational pension benefits. Even if the different solutions have similarities linked to the legal framework governing Swiss occupational pension provision, they each have their own advantages, which obviously need to be taken into account depending on the type of company that requests affiliation. Here's a quick overview.

A stand-alone foundation is a company's own pension fund, accessible only to its employees, which bears all the actuarial risks (old age, death and disability). Stand-alone pension funds account for around 36% of structures in Switzerland.

This type of pension fund offers the greatest degree of autonomy to companies, which can therefore decide upon the conversion rate, investment strategies, interest on retirement assets and the distribution of any surpluses. Managing a pension fund of this kind requires a great deal of time and expertise.

Semi-autonomous pension funds are pension institutions that have also been set up by companies for their employees, and which take care of the investments. By contrast, the risks of death and disability are entrusted in whole or in part to an insurance company. Semi-autonomous foundations account for 57% of Swiss pension funds and are mainly intended for large companies that want independent, tailor-made management of their staff pension schemes while delegating the risks.

A collective foundation is a pension institution that brings together several employers without any solidarity between them. Thanks to this solution, employers can create a semi-autonomous form of pension fund within an existing structure. Depending on the type of collective fund and the characteristics of the company, different levels of autonomy are possible.

The main advantage lies in the pooling and optimisation of fixed costs, mainly administrative costs but often also investments. Although collective foundations account for 3.5% of pension funds nationwide, almost all Swiss companies (98%) opt for this solution to manage their employees' pension provision. Within these pension funds, there are:

Similar to the collective scheme, the joint pension fund is based on solidarity between the affiliated employers. The investment strategy and conversion rate are identical for all affiliated companies. Each affiliated company can, of course, decide on its own pension plan.

The joint foundation is more suitable and accessible to SMEs, which benefit from solidarity between affiliated employers (joint accounting and assets) and therefore from a single investment strategy for everyone. The main advantages are economies of scale, risk diversification and overall reliability.

Collective or joint foundations with full insurance delegate the entire risk to an insurance company. As a result, the level of cover is always 100%. The cost of this security is reflected in low conversion rates, high risk premiums and low interest rate expectations in favour of insured persons. The collective or joint institutions that offer comprehensive insurance are therefore a solution for employers who are less open to risk.

The disadvantage of this solution lies in the fact that the insurer must limit the risks it takes, by choosing a low-risk asset allocation, which significantly reduces the return allocated to insured employees’ savings accounts.

In the public sector, it is institutions governed by public law that manage employees' pension provision. Municipal or cantonal institutions, for example, are therefore automatically linked to public pension schemes.

An attractive LPP/BVG strategy has advantages for both employers and employees.

For employers, a good occupational pension plan can help retain talent and enhance the company's reputation, for example by improving benefits (extra-mandatory portion).

For employees, attractive LPP/BVG benefits offered by the company provide a degree of financial security once staff reaches retirement age, as well as protection in the event of disability or death.

There are a number of key stages involved in implementing occupational pension solutions for employees in Switzerland, to ensure that the system chosen meets the company's legal, financial and human requirements. It's up to each company to find the pension solution best suited to its requirements and key aspects.

Active in occupational pensions since 1985, Groupe Mutuel offers a full range of pension solutions to companies.

Affiliation to a pension fund offers all the freedom of a semi-autonomous company pension fund, while delegating responsibilities to the Foundation Board of Groupe Mutuel collective foundation. This solution is designed primarily for large companies that wish to gain greater autonomy in their staff pension schemes, as well as for companies that already have an existing foundation and wish to reduce the responsibilities of their management bodies and pool costs.

Affiliation to the Groupe Mutuel Prévoyance-GMP joint fund is an opportunity for SMEs to join a proven structure. More than 3,000 companies have placed their trust in us to insure the future of their employees, thus representing nearly 30,000 active employees or pensioners.

At 31 December 2024, the estimated coverage ratio before closing was 113.2%, the investment performance was 7.8% and the return on assets for the past year was 3.25%. The average interest rate over 10 years (2015 to 2024) is 2.80%. The conversion rate is set at 5.6% on the entire retirement capital for retirements in 2025 and 2026 (M/W age 65). In terms of ESG (environmental, social and governance criteria), the overall investment portfolio has been rated A- (scale from A+ to D) by the external company Conser SA, which is an excellent result.