Pension schemes 1e

[thc]

Starting a new thread, sorry if I missed another one, because the search function doesn’t allow very short search strings (‘1e’).

Question: Has anyone experience with 1e pension schemes?

In my understanding, this short 1e name refers to the modified 2nd pillar act no.2 in October 2017 (FedLex in German and French; press release in German and French) and gives more flexible pension scheme options to those with annual income between 129k and 860k. Of course, this won’t apply to everyone but there are quite a few high earners on this blog.

I just discovered that my employer is part of the contracting institutions working with finpension 1e Collective Foundation (listed in the References section). Given the reputation of finpension for their vested benefits (see many other posts), this picked my interest. To me this looks a bit like some schemes in the US.

Is it worth looking into this to increase the yield (and risk) of the extra-mandatory 2nd pillar?
Has any past experience to share (service, getting in and out, fees)?

Thx!

[Ed_Waadt]

1e has the advantages of not being subject to all the restrictions that regular LPP (minimum and extra-mandatory is) so the plans can be more aggressive. However there is no minimum return or guarantee so it is theoretically possible that at the end you have less than what you put in. You also have to take it out as capital, you cannot convert it into an annuity.

My personal opinion: I have some money in my 1e plan with a very aggressive strategy consisting of 90% stocks. Though the TER is higher than self-implementation there is the tax advantage and since there is a lot of equity exposure I do not feel as if I’m leaving a lot of money on the table (as opposed to regular LPP).

[FI_yes_RE_maybe]

Personally, i would if i were you, always go for the 1e solution. You have much more flexibility and if you have a long enough time horizon, you will always be better off.

Possible issues: if you have to (or want to) change your company, and the new company does not offer such a 1e solution, you might have to sell your assets at the most “stupid” moment and bring it back into a regular 2nd pillar… where you wont be able to participate when the upmove comes.

But in that case, i would just transfer the 1e solution to a separat account and not bring it in back again (see this discussion here).

[Ed_Waadt]

@FI_yes_RE_maybe

But in that case, i would just transfer the 1e solution to a separat account and not bring it in back again

I never thought that my next employer might not offer this! Is this something you can do legally for the 1e part? Or do you theoretically have to move it over as regular 2nd pillar? We know that “forgetting” is possible (that’s what the other thread is for), but I’m interested in the theory and the law.

[FI_yes_RE_maybe]

Honestly - i’m not quite sure about the legal part - i guess it’s more about “forgetting” - but guess they would ask less questions… but we might need an expert on that topic to know it for sure.
Well, employer with a 1e solution are rather rare as far as i know…

[mikasa]

I just wanted to link the poor Swiss post on pillar 1e in case it helps: What Is A 1e Pension Plan (pillar 1e)? - The Poor Swiss

[1742]

@Ed_Waadt

do you theoretically have to move it over as regular 2nd pillar?

Yes. Not only are 1e plans only offered by a tiny fraction of employers, legally you must transfer all of your assets, including those from a 1e plan, to whatever solution your potential future employer offers. So yes, you risk to sell in a dip and transfer to a solution where you can’t recover because of a drastically more conservative asset allocation.

I like the linked summary from @thepoorswiss . Just to point out: You typically need a salary quite significantly surpassing the 129k CHF threshold (I’d say >250k CHF), as otherwise the cost of the administration is too high to effectively manage two pension funds, and even if offered, such plans are also often restricted to senior management (even if you earn the salary).

I myself have access to a 1e plan, and it’s so glorious it should not be allowed. Not only does it expand the tax savings opportunity for high income earners, it also offers a legal way to remove yourself from the known issues of the 2nd pillar, like the yearly hidden redistribution from active contributors to retirees.

[wapiti]

Only the part above 129k can be put inside the 1e scheme. So Like @1742 said you need to have a salary way bigger, otherwise, a 1e plan makes little sense.

Moreover, the buybacks are calculated differently on 1e plan:

With 1e plans, things are a little simpler: the maximum purchase sum is calculated on the basis of the contributions. These may not exceed 25 percent of the insured salary per possible contribution year. If early retirement is subsequently waived, contributions are suspended. Your disadvantage: you no longer benefit from employer saving contributions. You have virtually paid them yourself by buying into early retirement.

[thc]

Thanks all and especially to the @thepoorswiss for his article which I somehow missed.

Point well taken: don’t change to another employer without 1e, or it might be painful in a bear market!

I will look into the yourpension conditions and give an update. And if you reach FI with RE, you can eventually transfer to valuepension in the sister foundation, from what I’ve read (sort of a 1e to vested benefits conversion). Sounds neat!

[thc]

Some feedback on my new 1e pension scheme which started in Jan 2022.

So in addition to my standard 2nd pillar, I can play around with my 2nd 2nd pillar (sorry, pun intended). The finpension 1e scheme lets you select the shares / bonds / cash distribution, so I went for 80% shares and I can buy back whenever I want to lower income taxes. In addition the employer and the employee have a small monthly contribution based on the amount of salary beyond the 129k base salary.

So the way I get it, you don’t have a choice for 1e pension schemes, just like the regular 2nd pillar. It depends on your employer, their agreements with pension institutions, but in case yours offers that and you have a high salary you should crunch numbers and see how to optimize your savings while reducing the income tax which would be high otherwise.

[yetanothername]

@TeaCup

Upon leaving my employer, there was a clear message that they were not allowed to segregate out 1e amounts. Meaning that the 1e ended up together with the normal pension amount and was transferred to the new employer which then may, or may not, have another 1e. My case, they don’t do.

This can’t be generalized. My wife’s 1e Plan is with a different provider than the pension fund. Should not be too hard to put it in a different Freizügigkeitskonto.

Also, if you are job hopping, the 1e should be conservative. If you are planning on staying for a while, then you can go with more risk.