LOB Guarantee Fund

The LOB Guarantee Fund is a foundation which was founded by decree of the Swiss federal government in 1984. Swiss occupational pension funds are required to contribute to the fund. In the event that an occupational pension fund goes bankrupt, the LOB Guarantee Fund pays out a benefit equal to the difference between the bankrupt pension fund’s liquidated assets and the balances owed by the pension fund to its participants. This prevents pension fund participants from losing their pensions in the event of pension fund bankruptcy.

The LOB Guarantee Fund insures benefits made up of compulsory contributions to your pension fund (pillar 2a). In the event that a pension fund goes bankrupt, the protection scheme reimburses the pension fund's participants for the obligatory portion of their pension fund benefits.

The scheme also covers non-compulsory contributions (pillar 2b) which are paid through your employer as per the conditions laid out in the pension plan. 

However, coverage for total benefits is limited to one-and-a-half times the maximum salary for which you are required to pay compulsory contributions. If your salary and resulting pension fund contributions exceed that limit, the portion of your pension fund contributions which falls above the threshold is not insured. This means that 1e benefits and executive pension plans are generally not covered by the pension fund bankruptcy protection scheme.

Voluntary payments which you make directly to your pension fund to close gaps in benefits are also covered up to the limits applicable to non-compulsory contributions, as long as they are made in accordance with your pension fund’s buy-in schedule.

Pensions which are already being paid out by a pension fund when it becomes insolvent are also insured, up to a maximum of 70 percent of the limit which applies to pension fund benefits (one-and-a-half times the maximum salary for compulsory pension fund contributions).

In addition to its primary task as an insurance scheme for occupational pension funds, the LOB Guarantee Fund also pays out subsidies to pension funds which are demographically challenged (high proportions of elderly contributors). It also acts as a central coordinator between Swiss occupational pension funds and current and former pension fund participants.

The LOB Guarantee Fund is financed by Swiss pension funds. Pension funds pay separate contributions to the insolvency protection scheme and to the scheme which subsidizes struggling pension funds.

More on this topic:
Depositor protection for Swiss bank accounts explained
How to locate lost Swiss pension fund benefits
The Substitute Occupational Benefit Institution explained
Compare Swiss vested benefits accounts
Compare Swiss pillar 3a retirement accounts
Compare pillar 3a and vested benefits retirement funds

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