1e Pension Plan

In Swiss retirement planning, the term 1e denotes a category of voluntary occupational pension fund retirement savings within which contributors can participate in investment decisions. The Swiss 1e designation falls under the broader category of non-compulsory occupational pension fund benefits (pillar 2b).

The term is derived from provision 1e of the Swiss ordinance governing occupational retirement savings. This provision governs voluntary contributions to occupational pension funds which are based on the portion of a salary in excess of 1.5 times the coordinated salary. Currently, that means the portion of an annual salary which falls between 132,300 and 882,000 Swiss francs.

Employees are legally allowed to choose how the 1e portion of voluntary contributions is invested. This sets 1e retirement plans apart from compulsory contributions (pillar 2a), and non-compulsory contributions on the portion of a salary which falls below 132,300 francs. These are invested by a pension fund or vested benefits foundation on behalf of their holders.

Employees can choose between up to 10 different investment portfolios, at least one of which must use a very low-risk strategy. Employees' themselves can determine the best investment strategy for their individual risk tolerance and investment goals. Unlike standard voluntary contributions, plan providers do not guarantee a minimum interest rate for invested 1e benefits. Returns are based entirely on the performance of investments.

Unlike pillar 2a occupational pension funds, 1e retirement plan providers are not required to guarantee assets. If investments perform poorly, plans can make losses and decrease in value.

Another difference between 1e benefits and other pension fund benefits is that 1e benefits are not guaranteed by the LOB Guarantee Fund against the risk of the pension fund going bankrupt. 

Another significant difference is that 1e retirement plan providers typically segregate individuals’ assets. One reason for this is that the 1e provision forbids pension funds and other plan providers from investing an employee’s assets outside of the strategy selected by that employee. This sets it apart from conventional pension funds, which pool the assets and contributions of all participants in a common fund, invest the fund as a whole, and pay out pensions to retired participants from the common fund. This can be beneficial in some cases – for example when an imbalance of pensioners in relation to contributors would result in the depletion of a pooled fund.

The primary purpose of 1e retirement plans is to enable employees who make voluntary contributions to occupational pension funds to participate in the way that their assets are invested.

With regards to withdrawals, 1e retirement assets are subject to the same rules which govern pillar 2b assets. 1e retirement savings may be withdrawn for the purpose of buying a primary residence, when their holder becomes self-employed, or when their holder permanently takes up residence outside of Switzerland and Liechtenstein. Unlike pillar 2a assets, 1e assets can be cashed out by individuals who leave Switzerland and take up residence in an EFTA or EU member country. If their holder becomes unemployed, 1e assets must be transferred to a vested benefits foundation.

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Editor Daniel Dreier
Daniel Dreier is editor and personal finance expert at moneyland.ch.