Eight questions and answers about "1e" pension assets
BVG "1e": The first integrated bank savings solution for SMEs in Switzerland gives investors and in particular companies new freedoms in designing their pension provision. We answer the eight most pressing questions about "1e" pension plans.
1) What is "1e"?
The designation "1e plans" refers to Article 1e of the Ordinance on Occupational Retirement, Survivors' and Disability Pension Plans. The "1e" pension assets are fully segregated from existing pension fund assets and only pertain to the extra-mandatory portion of employee benefits insurance starting from CHF 126,900*. Insured persons are able to determine their investment strategy themselves and, similarly to the 3rd pillar, save in their own "pool." The advantage of this is that no redistributive effects in the basic fund have to be accepted. Redistributive effects, unfortunately, are a fact of life today in Switzerland, determined by demographic trends and the state of interest rates.
2) Why is this subject so topical right now?
Pension assets were always the most privileged asset pool for entrepreneurs – both from a tax perspective as well as because of prior claim in the case of bankruptcy. The "1e" plans were newly regulated by lawmakers as of October 1, 2017. This offers entrepreneurs and employees a number of attractive benefits.
3) What are the prerequisites for "1e" pension plans?
The "1e" solutions are aimed at entrepreneurs and managers, aged 18 and older, with an income of more than CHF 126,900.
4) What are the advantages of a "1e" pension plan for me?
The focus is on the strategic growth of pension assets, through the free selection of an investment strategy in which the insured persons participate on a one-to-one basis and hence can adjust the risk/return ratio to their individual needs. The instrument also offers attractive tax advantages. Especially for entrepreneurs, this is a tactical instrument in their withdrawal strategy that becomes more significant when viewed against the backdrop of tax regulation 17 and the anticipated increase in the taxation of dividends.
5) What risks need to be considered with a "1e" pension plan?
Unlike other pension solutions, insured persons have an investment risk with the "1e" plans. That's why it is very important that every insured person seeks advice when choosing an investment strategy and regularly reviews their portfolio. By adopting this risk, opportunities also arise. A positive performance is credited directly to the investors.
6) What investment opportunities are available?
Depending on the company's "1e" plan, the insured persons may choose from up to ten investment strategies. One of these is low risk. In the investment of pension assets as part of "1e" plans, Credit Suisse benefits greatly from its wealth of experience and track record with 3a investment products, which are structured in a similar way.
7) What withdrawal options are there?
Normal withdrawal of retirement assets when the insured person retires is exclusively as a lump sum. As with normal pension fund assets, the advance withdrawal of "1e" pension assets is possible for purchasing residential property, for the repayment of a mortgage or for the purchase of participation certificates in a cooperative housing association.
8) What costs should be anticipated?
Compared with its competitors, the investment costs of Credit Suisse's "1e" plans are low. As costs are a key factor in wealth accumulation over the long term, we offer a very direct way of influencing costs thanks to the broad selection of possible investments.
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* As of January 1, 2019, the entry threshold (minimum annual salary) for 1e plans increases to 127,980 francs.