Is my pension fund pension safe?

Let's start with the crucial question: Has there ever been a case where a retirement pension guaranteed under a pension fund's regulations was cancelled? I haven't found a single documented case. Now some background on how the second pillar works: If your employer goes bankrupt or your pension fund declares insolvency (which is extremely rare!), the federal BVG Guarantee Fund guarantees payment of pension fund retirement benefits as part of the insolvency proceedings, up to an amount of CHF 95,256 (70% of the salary cap of CHF 136,080 under Art. 56 para. 2 BVG). For pensions exceeding this amount, the Guarantee Fund provides no guarantee, and whether all regulatory pension entitlements can be covered depends on the liquidation proceeds. Bottom line: The pension fund annuities of low and middle earners are fully guaranteed. For high earners, reductions are possible in a bankruptcy scenario.

Now let's look at the alternatives:

1. The lump sum goes into a bank account: Besides the problem that your money earns little or no interest in a bank account, you could lose any amount exceeding the government deposit insurance of CHF 100,000 if the bank goes bankrupt. Former customers of Spar- und Leihkasse Thun (bankruptcy in 1991) know all about it. More recent cases include the Geneva branch of Kaupthing Bank (2009) and Aston Bank in Lugano (2009). And in the most recent government-brokered takeover of Bank Blue by Bank Red, a great many Swiss savers narrowly escaped a total meltdown.
2. The lump sum is invested in the stock market: In a good market cycle, you can earn decent money on the stock market. But it can also go the other way. Anyone willing to expose their retirement livelihood to these ups and downs needs nerves of steel, and should make sure that the markets' return potential isn't eaten up by excessive fees and charges. For all readers who are fed up with excessive asset management costs, we're happy to remind you of the Economico marketplace for cost-efficient investment solutions.
3. The lump sum goes under the mattress: Cash hoarded at home has no protection against inflation. But that's not all: According to the German Bundesbank, there is still no trace of 12.1 billion Deutschmarks that were never exchanged. A Bundesbank spokesperson reports finds of lost cash in curtains, tins, under geraniums and in old sofas. The author knows of cases in which 1,000-franc notes were mistaken for toilet paper…

Last but not least: You receive your pension fund annuity for the rest of your life. That makes it the only alternative that protects you against the risk of a wonderfully long life.