Swiss pillar 2a pension fund disadvantages

Hi forum,

Are there any disadvantages assoicated with saving for retirement through the Swiss second pillar?

Hi there,

In Switzerland, saving for retirement via a 2a occupational pension fund is compulsory for all full-time employees and many part-time employees. If you work for a Swiss employer, you have to save through the second pillar whether you like it or not.

There are a number of attributes of the second pillar which could be seen as disadvantages:

1. Your pension fund is decided by your employer. There are major differences between occupational pension funds in the terms and conditions, insurance coverage, retirement funding solutions and even the premiums and fees charged. While you may, in some cases, be able to suggest a pension fund, the final decision of which fund to use rests with your employer.

2. Because pension funds work with employers rather than private individuals, you will likely have to move to another pension fund when you change employers. The conditions attached to your new pension fund may be better or worse than those of your previous pension fund.

3. Adminstration related to moving to a new pension fund or opening a vested benefits account for your assets when you are not employed by a Swiss employer is primarily left to you to take care of.

4. You have little control over how your second pillar assets are distributed in the event of your death. Unlike private retirement assets (3a and 3b), pension fund savings do not fall under regular Swiss inheritance laws. How assets are distributed when a fund member dies is subject to each pension funds terms and conditions. While assets are typically passed on to immediate family members (spouses and children) in the form of a survivors pension, some pension funds may simply absorb your assets into the fund instead of passing them on to beneficiaries.

5. Pension fund members carry a certain amount of financial responsibility for the fund. If your occupational pension fund performs badly, you and your employer may have to make additional payments to keep the fund solvent.

The biggest advantage of second pillar pension funds is that they pay out a lifelong pension at a rate stipulated by the government. Your pension is also guranteed by the LOB Gurantee Fund. In this way, 2a pension funds offer a lot of security.

Best regards from Moneyguru

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