How do I manage my 2nd pillar if I become unemployed?
Losing your job can be an unsettling experience, especially for older workers. It becomes even more complex when it comes to managing your 2nd pillar in case of unemployment.
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From 1 January 2021, the new regulations will allow policyholders who so wish to maintain their occupational pension provision, even after redundancy.
1. New legal framework
The legislative reform adopted by Parliament in spring 2019 has implications for occupational pension provision. Under Article 47a of the BVG, insurance cover can be maintained in the event of job loss from the age of 58. This means that people who are made redundant shortly before retirement can maintain the level of their occupational pension provision.
1.1 Who is eligible?
Insureds who lose their jobs after reaching the age of 58 may apply to maintain their insurance cover within 30 days.
2. Choice of pension and salary plan
Voluntarily insured persons can choose how they wish to continue their former employer's pension plan. They have two options:
- Insure disability and survivors' pensions as well as retirement pensions
- Insure disability and survivors' pensions only
It is important to note that the former employer's pension plan, in which the risk and savings contributions are defined, cannot be modified. However, the insured AVS/AHV salary can be adjusted to the needs and financial capacity of the insured person on an optional basis. Any adjustment will result in a revision of the contributions and benefits stated in the insurance certificate. The salary may be adjusted once a year, on 1 January of the following year.
3. Payment of contributions
If the insurance is continued, the person insured on a voluntary basis must pay all the contributions. This includes risk and savings contributions as well as administration costs.
4. Termination of continued insurance
The continued insurance may be terminated when the insured person returns to work. The termination benefit is then transferred to the new employer's pension fund. The continuation of insurance cover can also end when the insured person retires, which can be early from the age of 58. The insured may then receive retirement benefits in the form of a pension, a lump-sum payment or a combination of a pension and a lump-sum payment.
5. Termination benefit in the event of unemployment
When the future unemployed leave their last employer, they are generally entitled to a termination benefit. They must transfer it to a vested benefits policy with an insurance institution or to an account with a bank foundation. This vested benefits solution is an ideal way for the unemployed to maintain their pension provision. They can grow their savings according to the solution they choose.
6. Continuation of pension cover with the supplementary institution
Unemployed persons have the option of continuing their pension cover either with the supplementary institution or with the institution of their last employer, insofar as the regulations authorise such continuation. In all cases, the insured must pay the full premium.
7. Unemployed persons and unemployment insurance
Most unemployed persons who receive daily unemployment benefit of more than CHF 74.30 are subject to second-pillar contributions at a rate of 2.2% of their insured salary. This contribution is paid jointly by the CA and the unemployed person. It is paid to the "institution de prévoyance des chômeurs", which is the supplementary institution.
8. Early withdrawal or pledging
If the insurance has been maintained for more than two years, retirement benefits are only paid out in the form of a pension. It is no longer possible to use the termination benefit for an early withdrawal or pledge to purchase a home. However, prepayments already made to finance home ownership can be repaid and purchases can be made into the occupational pension scheme.
9. Points to consider
The transitional provision adopted on 18 September 2020 stipulates that insured persons aged 58 or over who are no longer subject to occupational pension provision after 31 July 2020 as a result of their employer terminating their employment relationship may ask their pension fund to continue their insurance cover from 1 January 2021.
Managing the 2nd pillar in the event of unemployment may seem complex, but with a good understanding of the new regulations and the right decisions, you can maintain your level of occupational pension provision and guarantee your financial security in the future. It is always advisable to consult a financial adviser or occupational benefits expert for advice tailored to your specific situation.
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