Occupational Pension
Occupational Pension: 6 technical terms explained – definition, synonyms and legal basis.
Entry Threshold (Occupational Pension Provision)
Synonyms: Eintrittsschwelle, BVG-Eintrittsschwelle
The entry threshold is the legally defined minimum annual salary above which employees must be mandatorily insured under occupational pension provision (BVG).
Concept
The entry threshold is the minimum annual salary defined by law under the BVG that an employee must earn from a given employer for mandatory insurance under occupational pension provision to arise. If the entry threshold is not reached with a single employer, no BVG obligation applies to that employment relationship, even if the person concerned earns a higher total income across several part-time positions.
Effects of Multiple Employment
Since the entry threshold is assessed per employment relationship rather than across all gainful activities combined, individuals with several small part-time positions can remain entirely excluded from mandatory second-pillar coverage despite a considerable combined income overall. Under certain conditions, such individuals may voluntarily insure themselves with the BVG substitute occupational benefit institution.
Relevance for Advisory Practice
The entry threshold is an important topic particularly when advising part-time employees, individuals with multiple employers, and those in low-wage employment, as significant, often unrecognised pension gaps in the second pillar can arise here.
Coordinated Salary (Koordinierter Lohn)
Synonyms: Koordinierter Lohn
The coordinated salary is the portion of salary insured under occupational pension provision (BVG), calculated as the qualifying AHV salary less the coordination deduction.
Concept
The coordinated salary results from an insured person’s qualifying AHV salary after deducting the coordination deduction, and forms the basis on which retirement credits and risk contributions under mandatory occupational pension provision are calculated. It thus corresponds to the portion of salary actually additionally insured under the BVG on top of the AHV.
Calculation and Limits
The coordinated salary is legally bounded at the lower end (entry threshold) and upper end (BVG maximum salary): salaries below the entry threshold are exempt from mandatory BVG coverage, while salary portions above the BVG maximum can no longer be insured under mandatory provision, but at most within a supplementary executive pension scheme.
Relevance for Advisory Practice
Since the coordinated salary can change considerably in cases of part-time work, multiple employment, or fluctuating income, its correct calculation is of central practical importance for assessing actual pension coverage and identifying pension gaps.
Post-Employment Coverage (Nachdeckung)
Synonyms: Nachdeckung
Post-employment coverage is the legally guaranteed, time-limited continuation of death and disability protection under occupational pension provision after an employment relationship ends, before a new pension relationship begins.
Concept
Post-employment coverage refers to the legally mandated, time-limited continuation of death and disability protection under occupational pension provision after an insured person has left a pension fund but has not yet established a new pension relationship with a new employer. Under Swiss law, this protection applies for one month after the pension relationship ends.
Significance of the Time Gap
Without post-employment coverage, a dangerous coverage gap for death and disability risks would exist when changing jobs, since the previous pension relationship ends while the new one generally only begins upon starting the new position. Statutory post-employment coverage automatically closes this gap, regardless of whether and when new employment is found.
Relevance for Advisory Practice
Individuals who remain without new employment or affiliation with a pension fund for longer than one month (e.g. due to unemployment or self-employment) should be aware of the expiring post-employment coverage and, where appropriate, consider voluntary continued insurance or private death and disability coverage to close the resulting gap.
Occupational Pension Supervisory Commission (OAK BV)
Synonyms: OAK BV, Oberaufsichtskommission BVG
The OAK BV is the Swiss federal authority ensuring the consistent application of supervision over second-pillar pension funds by the regional supervisory authorities.
Concept
The Occupational Pension Supervisory Commission (Oberaufsichtskommission berufliche Vorsorge, OAK BV) is the independent federal authority exercising overall supervision over the regional and cantonal supervisory authorities of occupational pension provision, as well as over the BVG Security Fund and the BVG Substitute Occupational Benefit Institution. It was created as part of the structural reform of occupational pension provision to ensure a nationally consistent supervisory practice.
Functions
The OAK BV’s functions include, in particular, issuing directives to standardise supervisory activity, licensing and supervising occupational pension experts, approving the technical bases used by pension funds, and handling appeals against decisions of regional supervisory authorities.
Relevance for Insurance Practice
The OAK BV contributes to the stability and transparency of the second-pillar system by ensuring that pension funds nationwide are supervised according to uniform standards; for pension funds and their responsible bodies (boards of trustees), OAK BV directives constitute binding requirements for governance.
Pension Certificate (Vorsorgeausweis)
Synonyms: Vorsorgeausweis
The pension certificate is the annual document issued by a pension fund informing an insured person about their retirement savings and the expected benefits from occupational pension provision.
Concept
The pension certificate is the document issued by a pension fund at least annually, giving an insured person a transparent overview of the key figures of their occupational pension relationship: existing retirement savings, coordinated salary, current employer and employee contributions, and expected benefits in the event of retirement, disability, and death.
Content and Significance of the Key Figures
In addition to current retirement savings, the pension certificate regularly includes a projection of expected retirement savings upon reaching the reference age, as well as the applicable conversion rate used to calculate the expected annual retirement pension. It also shows the vested benefit in the event of leaving the fund and a possible early withdrawal for residential property.
Relevance for Advisory Practice
The pension certificate is the central starting document for any holistic pension and needs analysis, as it shows the concrete, individual benefits of the second pillar, which must be compared against the other provision components (AHV/IV, pillar 3a/3b) to identify coverage gaps.
Pension Fund Regulations (Vorsorgereglement)
Synonyms: Vorsorgereglement
Pension fund regulations are the rules issued by a pension fund that set out the specific rights and obligations of insured persons and the detailed benefits of occupational pension provision.
Concept
Pension fund regulations are the rules that every pension fund must issue, setting out, within the statutory minimum requirements of the BVG, the specific rights and obligations of affiliated employers and insured persons, as well as the exact scope of pension benefits (retirement benefits, disability and survivors’ benefits, conversion rates, interest crediting).
Content
Since the BVG only prescribes minimum benefits, pension funds can offer benefits exceeding the statutory minimum (supplementary benefits) in their regulations, such as more generous conversion rates, higher retirement credits, or extended risk benefits. The regulations must be issued by the pension fund’s supreme governing body (board of trustees) and approved by the competent supervisory authority.
Relevance for Advisory Practice
Since actual benefits can vary considerably between different pension funds due to differing regulatory provisions, reviewing the specific pension fund regulations — particularly when changing jobs or assessing the adequacy of an executive pension scheme — is an important part of individual pension advisory work.