Good pension fund or bad pension fund?

After a short holiday break, we return with Economico Flash 47 and the fresh topic: “Am I insured with a good or a bad pension fund?”

For most Swiss people, the pension fund is their most important and largest savings vehicle. Naturally, some savings pots are bigger than others. What criteria can I use to measure the size of my savings pot – or rather, my pension fund?

From the perspective of insured individuals, this question must first be divided into two independent sub-questions:

1. How generous is my pension plan?
2. How good is the cost-benefit ratio of my pension fund?

The pension plan itself is – for example when changing jobs – far more decisive for an individual than the question of which pension fund they are insured with. The attractiveness of the pension plan is therefore largely independent of the pension fund itself. Ultimately, it is your employer who determines the attractiveness of the pension plan.

How can the attractiveness of a pension plan be measured and assessed? Unfortunately, analysing a pension plan quickly leads into the confusing jargon of occupational pensions. The following plan elements influence the attractiveness of the pension plan:

• Which salary components are insured in the pension plan?
• Is a coordination deduction applied when defining the insured salary?
• How are the savings contributions determined?
• What share of the contributions is paid by the employer? (legal requirement: at least 50 percent)

Even the author would struggle to calculate his way through this jungle of technical terms. However, there is a trick: all the elements mentioned above ultimately influence the contributions that your employer pays into your pension fund.

The key metric for assessing the attractiveness of a pension plan is therefore the employer’s contribution amount. For the current year, you can find this amount on your pension certificate.

If you are interested in the total employer contributions over your remaining working life, calculating the expected total is a bit more complicated because contribution rates may change with age. However, such considerations can be very valuable when changing jobs.

Of course, the quality of the pension fund also determines the benefits you can expect from it in the future. The next flashes will therefore focus on assessing the cost-benefit ratio of a pension fund.