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Occupational benefits insurance

Pillar 2

Occupational benefits insurance constitutes Pillar 2 of the Swiss pension system.


General information on Pillar 2

Occupational benefits insurance constitutes Pillar 2 of Switzerland’s three-pillar social security system. Combined with the state pension (Pillar 1) and private pension (Pillar 3), it is designed to provide a reasonable income for those who have lost their source of earnings due to old age, disability, or death.

What is the purpose of occupational benefits insurance?
Occupational benefits insurance for old age, survivors, and disabled persons is intended as a supplement to AHV and IV benefits. While the latter aim to secure a person’s basic requirements, occupational benefits insurance enables individuals to maintain their current living standard, within reason. It pays benefits starting on the date of retirement, and also in the event of occupational disability or death.
What is the legal basis of occupational benefits insurance?

The Swiss Federal Law on Occupational Old Age, Survivors' and Disability Pension Plans (BVG) and your pension fund’s regulations provide the main legal basis for the insurance.

The BVG constitutes a legal framework that defines, among other things, the minimum requirements for pension benefits. The pension fund regulations, on the other hand, govern how benefits are insured and financed, and also the legal relationship between you the insured and the pension fund.


Information on the risks of disability and death

Since no one knows what lies in store, a pension plan will prove to be a wise choice when it comes securing your future and protecting you and your loved ones against the financial consequences of disability or even death. "My pension fund" contains the information you need on how Pillar 2 protects you against these risks.

Statutory disability benefits
  • Disability pension
  • Disabled person's child's pensions
Statutory benefits payable in the event of death
  • Widow's / widower's pension
  • Orphan's pensions
Principles

To cushion you financially against the risks of death and disability, the law requires you to enroll in a pension fund from the age of 18 if you are gainfully employed and your income reaches the lower BVG threshold. The contributions are split evenly between the employee and the employer, and the employee's contributions are deducted directly from his/her salary.

Disability risk

If you are unable to work – be it from chronic back pain or aching joints, burnout, or disease of the nervous system – and your entitlement to a salary ends, you may find yourself without a source of income. In this case, your pension fund will replace some of your lost earnings. AXA Winterthur will inform its insured about eligibility for benefits.

Risk of death

We need to ensure that those we leave behind will have a source of income in the event of our death. Here, a pension fund will help them cope with day-to-day financial worries by providing benefits that are geared to the family's requirements.

 

Disability

An accident or illness can radically change the course of your life. Although we prefer not to think about it, we cannot ignore this reality. Your pension fund is the expert in this field and, together with the other social insurers, will support you financially if you lose your source of income.

What benefits does your pension fund pay if you become disabled?

Occupational benefits insurance, together with Pillar 1, will provide you with a reasonable income in the form of a disability pension and, where relevant, a disabled person’s child’s pension. In addition, it will continue to manage your retirement savings.

  • Disability pension
    Eligibility

    Anyone who draws a disability pension (IV) is also eligible for disability benefits from the occupational insurance. The disability pension generally comes into effect after a one-year waiting period, provided that you have been at least 40% incapacitated throughout the period and have not yet reached retirement age.

    Amount in benefits

    The benefit amount is calculated based on the current retirement assets with interest, and the amount in retirement credits that will accrue without interest. The resulting retirement assets are converted into a disability pension using the conversion rate valid at the time.

    Some pension fund regulations foresee a disability pension that is based on the pensionable salary or the AHV salary and not on retirement assets. This may result in improved benefits.

    You will receive either a full or a partial pension, depending on your level of disability.
    • from 40% – quarter pension
    • from 50% – half pension
    • from 60% – three-quarter pension
    • from 70% – full pension
  • Disabled person's child's pension
    Eligibility

    If you draw a disability pension you are entitled to a disabled person's child's pension for each eligible child. Eligibility applies to children

    • up to their 18th birthday,
    • up to their 25th birthday if they are in school or training,
    • until gainfully employed if their disability level is 70% or more – but at the most up to their 25th birthday.
    Amount in benefits

    The disabled person's child's pension is 20% of the statutory disability pension for each child.

  • Coordination with other insurance benefits

    The pension fund must, by law, start to pay the disability pension when the 12-month waiting period ends. If an employer has daily benefits insurance for its employees, the pension fund can, however, defer its benefits until entitlement to daily benefits has expired.

     

    Occupational benefits insurance

    Goal of coordinating benefits: Insured persons should not gain financial advantage from a benefits case (incl. disability). For this reason, the pension fund can reduce its benefits if, together with those from other social insurance plans (IV, military and accident insurance), the total exceeds 90% of the estimated lost income.

 

Useful background information

On the instruction of the Federal Council, disability pensions are adjusted every three years to inflation. This does not apply, however, to extra-mandatory benefits.

Employers must notify the pension fund about any employees with an occupational disability.

On death

Coping with a stroke of fate is hard enough, but predicting it is impossible. To ensure that family members will be protected financially, Pillar 1 and Pillar 2 pensions are designed to provide stepwise coverage for the risk of death, in which case the pension fund will pay widow's, widower's and orphan's benefits.

Widow's / widower's pensions

In event of your death, the benefits from the pension fund will fully reflect your family situation.

  • Eligibility
    Married person

    If a married person dies, the surviving spouse is entitled to a pension until he or she remarries or dies, provided that he or she

    • must care for one or more children, or

    The pension can also be withdrawn as a lump sum, depending on the pension fund regulations. Or the surviving spouse receives a death lump sum in addition to the pension.

    If the conditions for a pension are not met, the surviving spouse will receive a single payment equivalent to three annual pensions.

    Divorced spouse

    A divorced spouse is treated in the same way as a widow or widower after the death of the former spouse, provided that

    • the marriage lasted at least 10 years and
    • the divorce decree specifies a pension or a lump sum that is equivalent to a lifelong pension.
    Registered partner

    A surviving registered partner is treated in the same way as a widow or widower.

    Life partner

    The pension fund regulations define the conditions under which your life partner would be eligible to receive a pension. We recommend that you find out about how the regulations would apply in your case.

  • Amount in benefits
    The deceased was gainfully employed

    The statutory widow's / widower's pension is 60% of the disability pension for which the deceased would have been entitled.

    The deceased received a retirement pension

    The statutory widow's / widower's pension is 60% of the retirement pension.

    The deceased received a disability pension

    The statutory widow's / widower's pension is 60% of the disability pension.

 

Orphan's pensions

An orphan's pension will help relieve financial strain caused by major expenses such as school fees, orthodontic treatment, or tickets for public transportation, if a source of income fails.

  • Eligibility

    The children of a deceased are entitled to an orphan's pension

    • up to their 18th birthday,
    • up to their 25th birthday if they are in school or training,
    • until gainfully employed, but at the most up to age 25, with a level of disability of at least 70%.
  • Amount in benefits
    The deceased was gainfully employed

    The statutory orphan's pension is 20% of the disability pension for which the deceased would have been eligible.

    The deceased received a retirement pension

    The statutory orphan's pension is 20% of the disability pension.

    The deceased received a disability pension

    The statutory orphan's pension is 20% of the disability pension.

 

Useful background information

In the absence of a surviving spouse or children, the regulations define who is eligible to receive any death lump sum.

On the instruction of the Federal Council, disability pensions are adjusted every three years to take account of inflation.

Employers must notify the pension fund whenever an employee dies.

For persons insured with an AXA Winterthur pension fund

Perhaps you are insured with an AXA Winterthur pension fund and would like additional information on the order of beneficiaries or on death lump sums? Our documents and forms service has what you are looking for. To access it you only need your contract number, which is included on the personal certificate you receive annually.



All about the divorce issue in the 2nd pillar

Do you any have questions about the impact from a divorce on occupational benefits? "My pension fund" explains the necessary steps and the legal basis with the aim of preventing unnecessary disputes.

Overview of the basics
  • In accordance with divorce law, vested benefits accrued during a marriage must be divided.
  • The termination benefit (amount the withdrawing person receives) is paid in accordance with the legally valid divorce decree.
  • The money must remain in an occupational benefits insurance plan.
Responsibilities and further information

When dealing with a divorce you will need to observe four important points with respect to the pension fund.

  • Legal basis
    Settling the issue of pension benefits marks an important change in divorce law, which came into force on January 1, 2000. The law states that in the event of divorce, each spouse is entitled to half of the pension fund assets accrued during the marriage. This also applies to assets from vested benefits accounts and policies. Entitlement is mutual, irrespective of any matrimonial property regime.
  • Procedure

    The pension fund calculates the vested benefits to be divided. For this it requires:

    • the date when you were married,
    • the expected date of the divorce.

    As long as no benefits case (i.e. retirement, disability, or death) occurs before the date of the divorce, the pension fund will confirm that the assets can be divided.

    The amount calculated and the address to which benefits are to be sent are recorded in the divorce decree. If your eligible spouse is subject to occupational benefits insurance, the amount will be transferred to the pension fund in question. If not, it will be credited to a vested benefits account or policy.

  • Consequences of the division

    The amount that the pension fund deducts from your retirement assets in accordance with the divorce decree also has financial consequences.

    • Reduction in the projected retirement pension
    • Potential reduction in benefits in the event of disability or death
  • Purchasing benefits in order to close the pension gap
    Insured persons have the option to purchase pension fund assets voluntarily in order to close a pension gap. Purchases of this kind are tax deductible. As a rule, benefits that were purchased cannot be withdrawn again as a lump sum for three years from the purchase date. This blocking period does not apply to benefits purchases associated with divorce.


Questions and answers on occupational benefits insurance

Pensions is a wide-ranging and complex topic; not only as a whole, but individually for each Pillar. "My pension fund" is the ideal portal for questions about Pillar 2. Our experts will be happy to provide more information.

BVG Information (in german)

occupational benefits insurance
Do you have any questions about your pension fund?

Verein BVG Information offers free information about your pension fund and occupational benefits insurance. Its 160 experts will ensure that you will get professional advice.

Appointments and locations
What happens if my work situation changes?

Whether it involves your salary, working hours, or place of residence, your benefits plan regulates every type of change clearly.

  • Moving to the EU
    Will I still get my pension benefits (for retirement, disability, or death) if I change my place of residence to the EU?

    Yes. You are entitled to benefits from your occupational benefits plan regardless of where you live – provided that you were once insured under Pillar 2 and paid contributions.

  • Reduction in working hours: Effect on assets
    If I work part-time, how will that affect my retirement assets?

    As a rule, your pension benefits will reduce commensurately. While the assets that have accrued so far will remain unchanged and continue to earn interest, reduced working hours generally also lead to a lower salary, which results in smaller contributions and lower benefits (on retirement, disability, or death).

    Exception: It is possible to compensate at least in part for a benefit reduction if the regulations allow the statutory coordination deduction under the mandatory portion of the benefits plan to be adjusted to working hours. This means a smaller reduction in "pensionable salary" and less of a decrease in benefits (in percent), because they are based on the pensionable salary.

  • Salary change: Effect on assets
    How does a salary change affect my pension assets and the benefits in the event of disability or death?

    Your assets will change more or less in line with the salary change and will influence your benefits accordingly. However, the salary change will affect only your benefits if

    • it remains in the range between the minimum and maximum salary as defined in the regulations,
    • no salary maximum has been defined and the salary is therefore insured without restrictions.

    However, if the regulations define a maximum pensionable salary and you now exceed this amount because of the change, your benefits will not adjust beyond this threshold.

  • Military service and civil defense
    I'm planning an absence from work because of military service or civil defense. Is my employer obligated to pay BVG contributions during this time?

    Yes, your employer must continue to pay your contributions.

 

What do I need to know about my personal certificate?

The personal certificate is one of the most important pension fund documents because it contains a wide range of crucial information, including what to do if it is lost.

  • Loss of the pension fund certificate
    What do I need to do if I lose my pension fund certificate (also referred to as the pension certificate or personal certificate)?

    You would need to notify your pension fund, which will send you a new one on request.

  • Change in contributions in the personal certificate
    Why has the retirement capital for regular retirement age suddenly changed compared to the amount shown on the last certificate?

    Possible causes for a difference in the amount from one year to the next include a change in your salary or working hours, or a change in the interest and conversion rates.

    The amounts shown are illustrations. They are calculated using a provisional interest rate for the whole calculation period (01.01.20XX until retirement age). As a rule, the assumed interest rate used in the calculation is shown.

  • Benefits shown on the personal certificate – guaranteed or not?
    Are the benefits shown on the personal certificate guaranteed?

    No, they're not. The pension fund recalculates the projected pension benefits annually based on the information available at the time, including the

    • annual salary
    • pensionable salary
    • coordination deduction
    • interest rates for calculating the retirement capital illustrations
    • conversion rates for calculating the pension benefits

    The actual benefits are calculated based on the regulatory provisions that apply on the precise date on which the benefits case (retirement, disability, or death) occurs.

 

Are there any other sources of information and what kind of help to they provide?

AXA will show you where to get help if you run into problems or have further questions.

  • Pension fund assets that seem to be missing
    How do I track down pension fund assets that seem to be missing?

    Please contact the Second Pillar Central Office in Berne.

    For inquiries

    Or perhaps you still have the documentation from the pension fund in question? If so, you can contact the fund directly.

  • Using or liquidating vested benefit accounts or policies
    How can I use or liquidate a vested benefits account or policy?

    If you are a member of a pension fund, you are required, by law, to transfer all your vested benefits to your account with that fund. Doing so can increase your pension benefits.

    If you want to liquidate your accounts or surrender your policies and transfer the amounts to your pension fund, you will need to submit a written request plus a payment slip from your pension fund to the occupational benefits institution.

  • Tax issues
    Who do I contact if I have questions about tax?

    You can contact your advisor at the pension fund if you have questions about benefits, contributions or benefit purchases. For complex questions relating to your canton of residence, we suggest that you contact the tax office for your canton.

    The instructions for completing your tax return and the website of your cantonal tax office also contain detailed information, including how to declare any pension benefits you have withdrawn and what portion of your Pillar 2 and Pillar 3a contributions is deductible.

 

Frequently asked questions on disability and death

Questions on disability and death generally raise uncertainty about our future. What will happen next? What steps do I need to take? What options do we have? AXA Winterthur will inform you about the rules and options as regards occupational benefits so that you are prepared if an emergency occurs.

  • Disability: Benefits
    What benefits will I receive from my pension fund if I become disabled?

    Your pension fund will pay you a disability pension. The amount is defined in the pension fund regulations.
    If your children are eligible for support, you are entitled by law (BVG) to a disabled person's child's pension of 20% of your disability pension. Eligibility applies to children

    • up to their 18th birthday
    • up to their 25th birthday if they are in school or training,
    • until gainfully employed, but at the most up to their 25th birthday, and if their disability level is 70% or more.
  • On death: Lump sum does not form part of the estate
    Does the death lump sum count as part of a deceased person's estate?

    No. The death lump sum is not part of the estate. It is reserved exclusively for the beneficiaries as defined in the regulations. Entitlement to the death lump sum continues even if the beneficiary relinquishes the estate.

  • On death: Entitlement defined in the will
    Can I include the death lump sum in my will?

    No, unfortunately that's not possible. The law and your pension fund regulations define who is entitled to receive death benefits.

    The pension fund can include further provisions in its regulations to address cases that are not covered by the statutory order of beneficiaries. We recommend that you find out about the provisions that apply in your situation.

  • On death: Beneficiary clause
    Who will receive benefits from my pension fund if I die?

    The law and your pension fund regulations define who is entitled to receive benefits in the event of a death. Benefits are paid in the form of a pension and/or a lump sum, primarily to the surviving spouse, life partner or children, depending on the regulations. If no spouse, life partner or children exist, the statutory order of beneficiaries lists other persons in the following order as being eligible:

    • Natural persons who received substantial support from the deceased, or the person with whom the deceased lived in a life partnership throughout the five years up to the time of death or who bears financial responsibility for one or more children from the relationship.
    • Children who do not fulfill the conditions set out under 1., parents and siblings.
    • Other statutory heirs.

    The pension fund can include further provisions in its regulations for cases that do not fall under the statutory order of beneficiaries. We recommend that you inform yourself about what provisions apply to your situation.

  • On death: Protection for survivors
    How well are spouses / life partners and children provided for in the event of your death?

    In the event of an insured person's death, the law and the pension fund's provisions may provide the following benefits:

    • Spouse's pension – also available to a registered partner
    • Spouse's pension – also available to a registered partner
    • Death lump sum
    • Orphan's pensions

    The actual amount in benefits and the terms for entitlement vary from one pension fund to another. We recommend that you refer to your personal certificate (also referred to as a pension certificate or pension fund certificate), read your pension fund regulations carefully, or ask your advisor.

    If you live in a life partnership (are not married or in a registered partnership), you will need to find out if a surviving partner's pension is even covered. If this is not the case or if the coverage is inadequate, we recommend that you provide for your partner by purchasing a private whole life policy.

    Private whole life insurance (in German)

 

Questions and answers on divorce

Divorce raises many questions that must be answered individually. But some things apply to all. Our experts will provide you with comprehensive information so that you can manage the divorce process smoothly as regards occupational benefits.

  • Mutual entitlements
    What do I need to pay in the event of a divorce and who decides?

    Settlement of the issue of pension benefits marked an important change in divorce law, which came into force on January 1, 2000. The law states that in the event of divorce, each spouse is entitled to half of the other spouse's vested benefits accrued during the marriage. This applies on the condition that

    • at least one spouse was enrolled in a pension fund.
    • no benefits case (e.g. retirement, disability) has already occurred for either spouse.

    Entitlement is mutual, irrespective of any matrimonial property regime.

    If divorce proceedings are conducted under Swiss law, the court will determine how much is to be transferred and how it is to be used, and it will record its decision in a legally binding decree.

    After the pension fund has transferred the amount defined in the decree, this may result in a reduction in your retirement assets. In this case you can purchase the same amount in benefits so as to restore the original level of coverage.

  • Pension gap after divorce
    Can I purchase benefits in the amount that was deducted from my pension fund as a result of divorce?

    Yes, that's possible.

  • Period for purchasing benefits after divorce
    Until when is it possible to purchase benefits after a divorce?

    As a rule, purchases of this kind are possible until a benefits case (i.e. retirement, disability, or death) occurs.



Explanation of important terms: disability, death and divorce

Benefits case

A benefits case occurs when a person reaches retirement age, becomes disabled, or dies.

 

Child's pension

The following are entitled to receive a child's pension:

  • biological and adopted children,
  • the insured person's foster children as defined by the AHV/IV,
  • stepchildren who were receiving full or primary financial report from the insured person at the time of his/her death.

 

Conversion rate

The conversion rate is used to calculate the annual pension. This is done by multiplying the available retirement capital by the conversion rate. The Federal Council sets the minimum conversion rate in accordance with the BVG.

 

Death lump sum

A death lump sum is a single payment made to the beneficiaries as defined in the regulations when the insured person dies.

 

Disabled person's child's pension, occupational benefits insurance

Persons who draw a disability pension are also entitled to a disabled person's child's pension for each eligible child. Eligibility applies to children

  • up to their 18th birthday,
  • up to their 25th birthday if they are in school or training,
  • until gainfully employed, but at the most up to their 25th birthday, and if their disability level is 70% or more.

Minimum BVG requirements state that a disabled person's child's pension is 20% of the statutory disability pension.

 

Disability pension, occupational benefits

An insured person who becomes disabled before reaching retirement age is entitled to a disability pension on expiry of the agreed waiting period. The amount of the disability pension is defined in the occupational benefits plan. You can calculate the minimum BVG disability pension using the same procedure and the same conversion rate as for the retirement pension: Multiply the retirement assets at the retirement date by the conversion rate valid on that date.

 

Disability

Disability is the permanent or long-term full or partial restriction of a person's ability to work or earn an income.

 

Exemption from contributions in the event of disability

Exemption from contribution payments is an insurance benefit. An insured person who is incapacitated or disabled prior to reaching retirement age is exempt from having to pay contributions once the agreed waiting period ends. The occupational benefits institution will continue to manage the pension at its own expense.

 

Level of disability

The disability level is the restriction in capacity for work as a percentage. This level is defined by the IV office.

 

Life partner

A life partner is a person who

  • receives substantial financial support from the insured,
  • shared the household with the insured person throughout the last five years up to his/her death,
  • bears financial responsibilities for supporting one or more children from the relationship.

Life partners may not be married or related to each other or live in a registered partnership.

 

Occupational disability

Persons are considered to be occupationally disabled if

  • an illness that has been objectively diagnosed by a doctor, or
  • an accident, or
  • an infirmity.

prevents them from working altogether or reduces their capacity to work in their profession or pursue another reasonable activity.

 

Orphan's pension

Orphan's pensions are paid when an insured person dies and leaves behind eligible children. Eligibility applies to children

  • up to their 18th birthday,
  • up to their 25th birthday if they are in school or training,
  • until gainfully employed, but at the most up to their 25th birthday, and if their disability level is 70% or more.

Minimum BVG requirements state that an orphan's pension equals 20% of the statutory disability pension.

 

Pension

A pension is a regular payment to an insured person for a fixed period or for life.

 

Retirement pension

You can calculate your annual retirement pension by multiplying the retirement assets on the retirement date by the conversion rate valid at that time.

 

Surviving spouse’s pension

The waiting period is the time between the date on which a person becomes unable to work and the date on which the disability pension or exemption from premium payments begins.

 

Vested benefits account

If you temporarily or permanently withdraw from an occupational benefits institution (e.g. if you quit your job, take leave, or go abroad) and are unable to transfer your vested benefits to a new institution, you are obligated to maintain all of your accrued pension assets. This leaves you with two options:

  • You can deposit your vested benefits in an account with a benefits institution.
  • You can use the amount to purchase a vested benefits policy.

 

Vested benefits

If you withdraw early from an occupational benefits institution, you are entitled to the assets, referred to as vested benefits, that accrued during this time. The pension fund regulations define the vested benefits amount. The Federal Law on Vesting in Pension Plans guarantees a minimum in benefits.

 

Vested benefits policy

If you temporarily or permanently withdraw from an occupational benefits institution – e.g. if you quit your job, take leave, or go abroad – and are unable to transfer your vested benefits to a new institution, you are obligated to maintain all of your accrued pension assets. This leaves you with two options:

  • You can use the amount to purchase a vested benefits policy.
  • You can deposit your vested benefits in an account with a benefits institution.

 

Waiting period

The surviving spouse's pension is a widow's or widower's pension that becomes due following the death of a married insured person.

 

Widow's or widower's pension

A widow's or widower's pension is the amount paid to the partner of a married insured person when that person dies.

 



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