Starting on 1 January 2011, wage-earners have to pay a total of 10.3% of their gross salary to the Federal Retirement and Survivors' Insurance (AHV/AVS, 8.4%), Federal Disability Insurance (IV/AI, 1.4%) and loss of earnings insurance (EO/APG 0.5%, increased by 0.2%). Employers deduct half of the contribution (5.15%) from their employees' salaries and transfer it to the AHV/AVS Compensation Fund together with their own share (also 5.15%). The unemployment insurance contribution (ALV/AC) is additional to the 10.3%. The ALV/AC contribution has been increased to 2.2% of the reference annual salary (maximum CHF 2,775) up to CHF 126,000. For the salary portion between CHF 126,000 and the upper limit of CHF 315,000, the ALV/AC contribution is 1% of the reference annual salary (maximum CHF 1,890). No ALV/AC contribution is payable on the portion exceeding CHF 315,000. Persons who have reached the legal retirement age and decide to go on working continue to pay AHV/AVS, IV/AI and EO/AVG contributions, but no longer contribute to the ALV/AC.

Self-employed persons and persons working for employers who are not obliged to pay contributions have to pay the full amount themselves. The new contribution rates are: AHV/AVS 7.8%, IV/AV 1.4%, and EO/AVG 0.5%, or 9.7% altogether. Persons earning less than CHF 55,700 per year pay lower AHV/AVS, IV/AI and EO/AVG contribution rates. The bottom limit is now CHF 9,300, with a contribution rate of 5.2%. The annual minimum AHV/AVS, IV/AI and EO/AVG contribution for self-employeds and persons who are not gainfully employed has been raised to CHF 475; the minimum contribution for persons who are voluntarily inured is CHF 904.

Higher AHV/AVS benefits and supplemental benefits

AHV/AVS and IV/AI pensions and the supplemental living allowance benefit (EL/PC) have been adjusted for increases in the cost of living effective 1 January 2011. The minimum AHV/AVS and IV/AI pension has thus been increased to CHF 1,160 and the maximum pension to CHF 2,320 per month. The upper limit for a married couple is now CHF 3,480. As for supplemental benefits, the general living allowance has been increased from CHF 18,270 to CHF 19,050 per year for single persons, from CHF 28,080 to CHF 28,575 for married couples and from CHF9,780 to CHF 9,945 for orphans.

Occupational pension plan limits have been adjusted accordingly

Since AHV/AVS pensions have been increased, occupational pension plan limits have been adjusted accordingly and from the same date. The limits stipulated in a compulsory occupational pension plan determines the minimum salary for compulsory benefits coverage and the upper and lower reference salary limits. These limits are adjusted in line with the AHV/AVS retirement pension in order to ensure that the first and second pillar are always co-ordinated. Coverage is compulsory when the annual salary equals at least three-quarters of the maximum AHV/AVS annual pension, i.e. CHF 20,880. The upper limit for the reference annual salary can be set in the pension plan regulations, but it must not be lower than three times the maximum annual AHV/AVS pension, i.e. CHF 83,520. The maximum pensionable salary is CHF 835,200. The allowance deducted from the reference annual salary is equal to the minimum AHV/AVS pension, i.e. CHF 13,920.

Changes also affect 3a pillar

The maximum tax deductible allowance for tied pension assets (pillar 3a) now equals CHF 6,682  for persons with a 2nd pillar plan, and CHF 33,408 for persons without a 2nd pillar. The new limits are also effective from 1 January 2011.

New maximum salary limit for BVG/LPP Guaranty Fund

In case of insolvency, the Guaranty Fund will now step in for pension plan benefits up to a new maximum limit of CHF 125,280. The contribution for the subsidy for unfavourable age structure has been left at 0.07% while the contribution for insolvency and other benefits has been lowered to 0.01%. The BVG/LPP Guaranty Fund is a national occupational benefits institution. It is financed by affiliated pension funds which are subject to the Law on Vesting in Pension Plans.

BVG/LPP minimum interest rate unchanged

The BVG/LPP minimum interest rate is unchanged at 2% for 2011. It is the legal minimum interest rate payable on pension plan assets. By comparison, 10-year federal bonds currently yield 1.85%.

Lower conversion rate

The conversion rate for pension plan members entering retirement between now and 2016 has been lowered for 2011 to 6.95% (previously 7%) for men and 6.9% (6,95%) for women. This means that, when a person retires, his retirement savings capital is multiplied by 6.95% (or 6.9%) to determine the amount of his annual pension. Example: CHF 100,000 x 6.9% = CHF 6,900 per year. When the BVG/LPP was introduced in 1985, the conversion rate was 7.2%.

BVG/LPP contribution term increased for older employees

Effective 1 January 2011, members of BVG/LPP pension plans who reduce their degree of employment after age 58 may remain covered at their existing salary level. Article 33a BVG/LPP provides that coverage may be maintained at the existing level after a reduction in AHV/AVS salary provided the salary is not reduced by more than one-half. If the member elects to withdraw a portion of his retirement benefit, he will be treated as a pensioner for that portion. Active coverage can only be maintained for any retirement benefits that are not withdrawn.

Conversely, employees who choose to continue working after they reach the legal retirement age may continue contributing to their pension plan until they are 70. Pursuant to Article 33b BVG/LPP, pension funds may allow members who continue working after the legal retirement age, i.e. after the end of their main pension plan, to continue paying contributions. These measures are designed to further the employment of older employees and facilitate their continued participation in the labour market.

End of transitional period for modifying BVG/LPP investment regulations

The investment guidelines laid down in the Ordinance on Occupational Retirement, Survivors' and Disability Pension Plans (BVV2/OPP2) were amended effective 1 January 2009. The transitional period for the implementation of those changes in the investment rules and asset allocations of pension plans expired on 1 January 2011.