Growing numbers of Swiss companies are joining collective or joint schemes (CJS). According to current figures published by the Federal Statistical Office, 74% of the approximately 4.6 million active insured employees are members of one of these two management structures, with more than half of the total assets now held by collective and joint schemes. Ten years ago, this figure was as low as 20%.
Collective and joint schemes take pressure off companies
A key reason for the growth of CJS is increased regulation, which company pension funds are finding harder to manage. What’s more, companies running their own pension fund often struggle to find suitable candidates for the foundation board, not least in light of the associated responsibilities and potential liability risks.
Joining a CJS, on the other hand, has a number of advantages for companies: Their managers have fewer responsibilities and benefit from the professionalism and extensive expertise CJS bring to the field of pension fund management. So, what exactly is the difference between a collective foundation and a joint institution?
| Collective foundation | Joint institution | |
|---|---|---|
| Accounting | Separate accounts for each employee benefits unit | Uniform annual accounts for all employee benefits units |
| Coverage ratio | Separate coverage ratio per employee benefits unit | Uniform coverage ratio for the entire foundation |
| Investment risk | Employee benefits units assume a certain share of the investment risk | Investment risk is borne jointly within the foundation |
| Investment strategy | Collective foundations offering individual investments allow each employee benefits unit to choose its own investment strategy | One uniform investment strategy for all employee benefits units |
The options offered in terms of investment strategies play a major role in the choice of the foundation model. After all, the investment strategy and the associated interest rate have a significant impact on the development of the members’ savings capital.
Most CJS have adopted the classic pool investment model, according to which the foundation board defines the investment strategy for all affiliated companies based on the foundation’s risk capacity. The investment risk is shared by all companies and their employees and the savings capital earns interest at a standardised rate. There is a disadvantage though: When a company terminates the affiliation agreement, any overfunding is generally not passed on.
Collective foundations with individual investment options offer more alternatives
In the case of collective foundations with individual investment options, on the other hand, the affiliated companies determine the investment risk they are prepared to take on the basis of their risk profile, and choose their investment strategy accordingly. Each affiliated company has its own funding ratio, its own interest rate policy and its own annual accounts. When affiliated companies terminate their affiliation agreement, they take any over- or underfunding with them. In the event of underfunding, the members’ termination benefits are reduced accordingly.
In recent years, numerous companies have discontinued their company pension fund and have joined the GEMINI Collective Foundation. With GEMINI, they have the option of retaining their previous asset manager if their assets exceed CHF 10 million. They also have various options when it comes to taking over pensioner portfolios.
With GEMINI, the clients make the decisions
At the GEMINI Collective Foundation, clients determine the key parameters of their employee benefits solution, from financing and benefits structure to investments:
GEMINI manages your employee benefits unit like an independent pension fund – with its own annual accounts and its own coverage ratio.
You can choose between four investment pools, or your own individual investment strategy. Pools can be switched twice a year free of charge.
With assets of CHF 10 million or above, you can define a tailor-made investment strategy and implement it through your own asset manager.
Flexible pension solutions
You are free to define the benefits and financing of your employee benefits unit. What’s more, you also decide on the investment of assets and the interest rate.
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