The Swiss pension fund for the employees of the canton of Zurich, BVK, is setting up two new pension plans available to members from 1 January 2024.

The first – called ‘Dyna’, or short for Dynamic – will see the amount of pension benefits decrease over time from the start of the retirement phase. The pension fund assumes that, under the plan, retirees are more inclined to be active immediately after retirement, and need more money to make a living, BVK disclosed.

Therefore, anyone who opts for this model benefits from a higher amount of pension at the time of retirement, which then decreases continuously up to the age of 75, it added. From the age of 75, a constant level of pension is paid out until death, which is a little lower than the standard amount of pension paid by the scheme.

The second pension plan – ‘Kombi’ – is available for members to withdraw an amount of pension benefits in cash all at once at the time of retirement.

The entire pension benefit, from the retirement age, to the age of 75, is paid out as a whole or in part as a lump sum. From the age of 75, pensioners receive the standard pension until death.

With the new models the lifelong pension is guaranteed and, in contrast to the lump sum or partial withdrawal of saved assets, both the bridging allowance and the survivors’ benefits are included in the plans.

“We have found that many members make a lump sum or partial withdrawal [of pension assets] from their savings for the wrong reasons,” said Thomas Schönbächler, BVK’s chief executive officer, explaining the reasons for introducing the two new pension plans.

He added: “With a conventional lump-sum withdrawal, the retiree bears full responsibility and risk for the capital. With the new models, on the other hand, the lifelong pension is guaranteed.”

BVK also offers a ‘Flex’ model, where the pensioner bears full responsibility and risk for the choice made to withdraw capital all at once. The Flex plan gives the possibility to withdraw savings all at once, or only in part, at the time of retirement.

Retirees also have also the ‘Plus’ option, meaning they can choose a higher conversion rate at the expense of survivors’ benefits.

This model, which has been offered by BVK for several years, is chosen more frequently by women, and is particularly useful for single people or those living in a partnership with a double income.

A further plan offered by BVK is the ‘Norm’, with savings converted into a life-long pension.

A few more tweaks

The reform of the first pillar AHV has introduced the “reference age”, replacing the term statutory retirement age, for both for men and women at 65.

Pension savings at BVK can now be withdrawn in three steps, while previously the scheme gave the possibility to withdraw them in two steps.

There is now the option to make further contributions, specifically in the event of early retirement, if a retiree reach the threshold for making additional contributions based on salary and age. This means that the pension will see less of a reduction in the event of early retirement.

The bridging subsidy, given to people who decide to retire early, or who are sent into early retirement by the employer, is now calculated for the member’s financing portion until the AHV reference age is reached and deducted from the savings. The bridging subsidy is financed 40% by the member of the pension fund, and 60% by the employer.

In the case of lay-offs, the employer has now the option of paying the full benefit only if the employee has worked for the company for at least five years.

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