Swiss pension fund association calls for change to 1e plans proposal

Swiss pension fund association ASIP is calling for a change to the government’s proposal for the rules relating to the transfer of pension assets from so-called 1e plans to vested benefits institutions and pension funds when changing employers.

The government wants to tweak the law regulating vested benefits (Freizügigkeitsgesetzes, FZG) to allow pension fund members who change employers to temporarily transfer assets from a 1e plan, which are pension plans for high earners choosing between 10 investment strategies, to a vested benefits institution for two years.

Members of 1e plans can invest pension assets opting for strategies similar to those in the previous pension institution, making up for losses, according to the government. Members opting for a 1e plan bear opportunities and risks on investment returns.

Against this background, according to ASIP, it is difficult to understand why, in the event of a loss on investments, a separate option of ‘parking’ assets should be justified.

The assets would have to be transferred to a new pension fund with corresponding losses and would have to be borne immediately by the scheme, the association added.

The government’s proposal, that started a consultation to change the law on vested benefits, should mention explicitly that the transfer of 1e plans to a new pension fund is a case of classic vested benefits, which are paid to the new pension scheme in the form of chequebook money, the association stated.

ASIP rejects referring to such transfers as a ‘title transfer’ or building a customer-specific investment portfolio, it said.

The association demands that it should be made clear that a saver transferring savings to a vested benefits institution would not likely be able to choose an investment strategy corresponding exactly to the investment strategy drafted under the 1e plan.

Otherwise, the vested benefits institutions would have to develop individual investment profiles for 1e plans’ members, which would likely lead to high administrative effort, the association added.

Moreover, the new rules should clearly state that when vested benefits are transferred to a new institution, the member continues to bear the investment risks and must be expressly informed about such risks.

This means that, with an investment horizon of a maximum of two years, members should not choose risky investment strategies, questioning the changes proposed by the government, it added.

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