Tellco’s investment strategy focuses on long-term growth

With its investment strategy and dynamic risk management, Tellco pk aims for balance; the best possible return is to be achieved with the greatest possible security. This combination does not mean maximum profit, but in difficult phases it does not mean big losses either. Especially in economically challenging times, this is very important to many clients.

What is dynamic risk management?

The maximum acceptable risk of the investment strategy is periodically assessed, the market environment is systematically evaluated at regular intervals and a cost-efficient management of the equity quota is pursued. Compared to a static risk management, the share quota can vary more strongly.

Significance for the insured

With dynamic risk management, the risk of underfunding decreases, the return is better in the event of strong and prolonged bear markets and the pension fund remains capable of acting for longer. It can also be said that the insured can sleep more peacefully.

A changing market environment calls for dynamic risk management

The market environment has changed and the requirements for the risk-oriented management and supervision of pension funds have grown. To be successful in this, a professional organisation as well as long-term and performance-oriented instruments are required. The focus is on managing the equity portion of the invested assets, as this makes the largest contribution to risk.

The performance chart clearly shows how the investment strategy behaves during stock market fluctuations. The example shows the comparison to a pension fund with a more aggressive, static investment strategy. To make the data comparable, we had to align the data with our technical interest.

Performance

Less fluctuation in the coverage ratio thanks to long-term focus

It can be seen that after 2021, a very good stock market year, the coverage ratio of the comparison fund was around 5 percentage points higher than that of Tellco pk. If the markets are at a low, the difference is even greater, but with different signs: In 2011, the comparative coverage ratio is 12.5 percentage points lower than that of Tellco pk. The long-term view shows that in strong economic times Tellco pk does not gain quite as much as the biggest winners, but in bad stock market times it incurs fewer losses.

Coverage ratio

Our conclusion

Depending on the market environment, this does not necessarily result in a better return or coverage ratio in the long term compared to static risk management; however, overall and especially in the current period, the advantages clearly outweigh the disadvantages:
Especially in turbulent times, they have the certainty that the fluctuation margin in their investments is kept within limits.

News

The OASI reform came into force on 1 January 2024, and the changes involved also affect occupational and private pensions. Here is an overview of the key changes to occupational pensions, pillar 3a and vested benefits.

What are the changes to OASI?

The OASI 21 reform was approved by voters in 2022 and is intended to secure the pension system that is so important for the population as a whole. With this in mind, the following changes came into force on 1 January 2024:

  • The reference age (previously “statutory retirement age”) for women has been increased to 65, making it equal for both men and women.
  • The timing of retirement has been made more flexible, and can range between the ages of 63 and 70.
  • New statutory regulations have been introduced concerning partial retirement and early or deferred receipt of pension benefits.

These changes affect our pension provision as a whole, including pension funds, pillar 3 and vested benefits. It is worth taking a closer look at the consequences, as they also include new opportunities for employees.

What about occupational pensions?

  • Standardisation of reference age:
    As with pillar 1, the reference age for pillar 2 has also been standardised and will now be 65 for both men and women. A transitional arrangement will be in place for women until 2028.
  • Flexible timing for retirement:
    The moment of retirement can be chosen freely, and can now range between the ages of 63 and 70. This means that receipt of retirement capital or a pension can be deferred until an individual stops working altogether (up to the age of 70).
  • Statutory regulation of partial retirement:
    Partial retirement will remain an option, and is now subject to statutory regulation. In concrete terms, this means that in the event of partial retirement, the lump sum or a combination of lump sum and pension can be withdrawn in up to three stages.
  • Early withdrawal of pension capital:
    The conditions for the early withdrawal of pension fund assets are now also more comprehensive. There is now a statutory entitlement to early withdrawal from the age of 63, while pension funds can also provide for a lower age, but 58 at the earliest.
  • Deferral of the lump-sum or pension benefit in the event of continued employment:
    Those who work beyond the reference age can defer receipt of pension fund assets and continue to pay into pillar 2 up to the age of 70.
  • Simplified lump-sum withdrawal:
    Those wishing to withdraw their entire capital following retirement instead of receiving a pension can do so in up to three stages.

What about vested benefits?

  • Deferral of payment of vested benefits in the event of continued employment:
    Those who work beyond the reference age can also defer the withdrawal of vested benefits up to the age of 70, with no statutory requirement in terms of a minimum level of employment.
  • Five-year transitional period:
    Those reaching their statutory retirement age (now “reference age”) between 2024 and 2029 may still defer payment of their vested benefits, even if they are no longer in gainful employment – however, this rule will apply for a maximum period of five years or until the end of the transition period on 31 December 2029 at the latest.

What about pillar 3?

  • Early withdrawal of pillar 3a:
    Pillar 3a and 3b assets can be withdrawn between the ages of 60 and 70, while those working beyond the reference age can defer their withdrawal accordingly.
  • Transitional arrangement for women born up to and including 1964:
    A transitional arrangement is in place for women born up to and including 1964, according to which they can withdraw their restricted pension 3a assets without restriction from the age of 59.

Do you have any questions, or would you like to find out the best option for you?

Our experts will be happy to help.

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Why these changes?

The reform standardises the retirement regulations for all three pillars of the pension system. It also ensures equal treatment of all genders and creates incentives to remain in employment beyond the reference age and arrange retirement more flexibly. This development takes account of the increased life expectancy in Switzerland, and is also intended to ensure the financial stability of OASI in the long term.

Is that everything?

An OPA (Occupational Pensions Act) revision is planned in addition to the OASI reform, including changes such as a reduction in the minimum conversion rate for pension funds. A referendum has been called on the issue however, and it is expected to be put to the public vote in the second half of 2024.

The most important summarized
  • OASI reform comes into force on 1 January 2024
  • Effects on occupational & private pension provision