What is the best pension solution for my business?

What are the pension models in occupational pension provision (LPP)? What pension solution should I offer to my colleagues and employees? Which solution is best suited to my situation? How can I choose the best pension solution for my business?

Whether you run a start-up, a traditional business or a large corporation, you have an obligation to put a plan in place professional pension.’According to the LPP law, as an employer, you are required to guarantee your employees old age, death and disability insurance within the framework of a pension fund (for employees who receive an annual AVS salary greater than CHF 21' 510.)

Persistent low interest rates, increased life expectancy and a lack of reforms have made the market 2nd pillar or LPP difficult. From time to time, many businesses feel the need to re-examine their strategy. For young companies, choosing the most relevant solution is becoming more and more complex. In addition, offers from different pension institutions also vary, often significantly.

Each company being unique, it deserves a personalized pension solution. As a leader, you must be rigorous. To protect your employees and meet their needs in old age, you need effective pension solutions, appropriately covering the risks linked to old age, disability and death, and offering potential for optimized savings.

We observe that young companies often opt for minimalist plans, considering that the second pillar is a social burden like any other. This is not the case, because the second pillar is above all compulsory savings accompanied by significant tax privileges. A good pension plan and a robust fund are therefore a key element in attracting and retaining valuable employees.

Thanks to their in-depth knowledge in this area, the corporate pension specialists at Impact Financial Engineering give you an overview of the different solutions available in LPP so that you can choose the solution best suited to your situation.

What professional pension models are available?

There are 3 professional pension models available.

Complete insurance

Comprehensive insurance favors absolute security covering all risks (death and disability and even investment risks). What makes this variation interesting is that all services are 100% guaranteed by the insurance company. No overdraft is possible. All administrative tasks are taken care of by the service provider.  

However, you should keep in mind that you do not have the freedom to choose your own investment strategy. Autonomy is therefore low. Premiums are higher given the guarantee offered and return opportunities are reduced.  If you want absolute security for your professional pension and you do not want to take care of investments yourself, this option is for you.

Semi-autonomous solution or collective or common foundations  

This is a partially autonomous solution with which you can affiliate with a collective or joint foundation. Unlike comprehensive insurance, in semi-autonomous foundations, investment risk is borne by the foundation, affiliated companies and finally employees.  

At the same time, they take advantage of investment opportunities in the form of higher long-term returns. Depending on the structure of the semi-autonomous foundation, the investment strategy is decided either by the foundation board (for group collective investments) or by the management commission of the affiliated company (for individual investments).  

If you want to take advantage of optimal return opportunities in your occupational pension plan without giving up a certain security, this model might interest you.

Pension fund

This model offers companies the possibility of setting up a separate and independent pension fund, in complete autonomy. This means that they can freely define benefits (within the framework of legal provisions), how wealth is managed and the development of their own investment strategy. This option, often advantageous and adopted by large companies, offers the prospect of high returns in the long term, but also carries a risk of losses.  

If you want to choose your own investment strategy and have full control over its management, this pension solution will suit you.

Which pension model best suits my activity?

It all depends on the structure, needs and stage of development of your business. That said, all three models have their advantages and disadvantages.

Start-ups or small businesses often prefer comprehensive insurance because it offers a comprehensive, end-to-end solution, or in some cases, collective or common institutions with partial autonomy. Administrative costs are low because all tasks are delegated to service providers, and thus the degree of risk is limited. However, the returns offered are very low.  This is the price of security that comprehensive insurance offers and moreover fewer and fewer insurance companies are offering this solution

For medium-sized companies, we recommend regularly reviewing your occupational pension strategy so that you can adapt or modify it according to the life cycle of the company. Collective and joint foundations constitute an ideal pension option for most Swiss SMEs.  

This model is characterized by increased flexibility and better transparency in terms of costs and important decisions. This alternative offers better long-term return prospects and the distribution of risks incurred. However, in the event of future stock market fluctuations, it may be necessary to put in place remediation measures.

For larger companies, the semi-autonomous pension fund solution is very attractive. It thus makes it possible to exercise control over the framework elements of the pension plan and the investment strategy, while delegating pure risk insurance issues to a third party. This requires special know-how and almost always requires the support of expert advisors.  

Creating your own pension fund involves high costs and a greater administrative burden compared to other solutions. Furthermore, the risk of undercoverage cannot be excluded, which may also lead to the implementation of remediation measures.

We have dedicated teams of LPP advisors to help your business compare metrics like coverage rate, technical interest rate, costs and performance as part of a pure diligence review before entering into a contract company insurance. Impact FE will support you as a trusted consultant and partner at every stage of creating your own pension fund.  

Why is it necessary to have a suitable LPP solution?

Implementing an LPP plan has consequences on the cost of recruitment which, in turn, indirectly affects the profitability of your business. That said, aside from being a legal requirement, a secure and sustainable corporate pension plan for employees represents a competitive way to attract, hire and retain key employees in the 'business.  

However, the large number of service providers as well as the diversity of service offerings make the comparison and selection of the most appropriate solution for your business more difficult.    

This is where we come in by providing you with our expertise and advice.  

Whether you opt for a stand-alone pension fund or have comprehensive insurance and want to move to a collective foundation, our approach is clear and precise. We start with an analysis of the situation and then the needs and requirements of your company in terms of LPP.    

After establishing a detailed profile, a search for providers meeting the criteria is carried out and proposals are submitted to you. Depending on your wishes, we carry out a call for tenders or agree on a presentation.

Call us now to find out how we can help you find the most suitable LPP solution for your business.