Full insurance or partially autonomous pension fund: What suits your company?

In Switzerland, small and medium-sized enterprises basically have two models for occupational retirement provision: Full insurance or the partially autonomous pension fund. In the case of a pension plan with full insurance, all risks (death, disability, retirement and investment risk) are reinsured with an insurance company. In the case of a partially autonomous pension plan, only certain risks are passed on. In this article, we highlight the differences between the two models and provide decision-making aids for the optimum retirement provision strategy.

A partially autonomous collective foundation combines flexibility in investment management with shared risks. Companies and their employees bear the investment risk together, which offers higher potential returns. Risks such as death and disability are covered by reinsurance.

Advantages of the partially autonomous pension fund:

• Investment strategy: Flexible and income-oriented, which can lead to higher returns.
• Risk sharing: The company and employees share the investment risk.
• Individual customization: Customizable to the needs of the company, e.g. with higher contributions for certain employee groups.
• Co-determination: More transparency and participation in investment decisions.

With full insurance, the insurer bears all risks, including longevity, death, disability and the investment risk. This means maximum security for the companies, as insufficient cover is not possible. However, the returns are lower due to the risk averse investments.

Advantages of full insurance:

• Maximum security: No investment risk for the company or its employees.
• Complete risk coverage: All risks are fully covered by the insurer.
• Simple administration: Companies have little administrative work.

In view of the current low interest rate environment and limited investment options, partially autonomous pension funds are gaining in importance. They offer companies the opportunity to conduct their investment business independently while covering risks such as death and disability through life insurance. This flexibility leads to higher returns. One example is the Vita Collective Foundation, which achieved an average investment return of 5.38% between 2018 and 2022.

The Vita Collective Foundations have been relying on the partially autonomous model for 20 years and manage around CHF 20.6 billion in pension assets. Thanks to the broadly diversified investment strategy and higher investment income, employers and employees have benefited from above-average interest rates in recent years. Vita offers various occupational retirement provision solutions tailored to the needs of companies:

• Vita Classic: Flexible and sustainable pension solution for companies of all sizes.
• Vita Invest: Higher return potential with individual customization options.
  
• Vita Plus: Supplementary insurance for executive staff with extended risk benefits.
• Vita Select: A supplementary insurance policy that offers management employees more freedom in their investment strategy, provides companies with accounting advantages and enables reduced administration.
• Vita Relax: Full insurance for maximum security, ideal for start-ups and founders.
  
• Vita Select: With the 1e retirement provision plans, your executive staff can determine the investment strategy themselves.