The mandatory part of the occupational pension pays out about 6% currently. My question is: how is this guaranteed? Presumably, the sponsoring employer needs to top up the fund if there is a shortfall? What if the sponsoring company fails? What about cases such as VIAC vested benefits account? Presumably VIAC (or related sponsoring entity) are then on the hook? Is is this backstopped by the government?

This is the government body for providing a pension safety net: [Ger] https://www.oak-bv.admin.ch/de/beauf...inrichtung-bvg
I don't know if that covers all the risks. The 6% is the conversion rate [Umwandlungssatz] assuming you stay until the specified retirement age. This may also help [Ger] https://www.vermoegenszentrum.ch/wis...immt-die-rente but may be outdated.

Vested benefits foundations such as VIAC don't offer annuities. You have to take the lump sum.

One bit of good news announced just this evening regarding:

“Full AHV inflation compensation agreed.

AHV pensioners will definitely receive full inflation compensation next year. The parliament voted in favor of the plan for a second time on Monday.

Parliament is thus demanding that the Federal Council adjust AHV and IV pensions and supplementary benefits in line with the national consumer price index by the beginning of 2023 at the latest. In addition, the Federal Council is to submit a concept to parliament on how pensions can be regularly adjusted in future in the event of inflation of more than two percent.

Today, the federal government bases its AHV pensions on the so-called mixed index. Half of this is based on inflation and half on wage trends”.


Source: https://www.tagesanzeiger.ch/session...5-136838379564

In the event a CH pension fund becomes insolvent, the Sicherheitsfonds BVG is charged to step in. More information is at this link (English):

https://sfbvg.ch/en/tasks/insolvency-benefit-cases

Does this apply to all 3a funds ? Including ones that are not linked to banks / insurance companies etc ?

No, this only applies to pillar 2, not pillar 3a. Pillar 3a funds are anyway completely different, though, and there isn't a comparable insolvency risk.

Many people assume that pension assets from pillar 3a and vested benefits deposited with their bank are fully protected.

This is a mistake. The fact is that the balance on the pillar 3a account is not secured. The credit balance is privileged under bankruptcy law up to a maximum of CHF 100,000 per customer and pension foundation.

Unless it's at the ZKB where its fully insured by the canton.

I'm wondering about the case where you are working and part of the occupational pillar 2 scheme, but then you lose your job or retire early.

You get kicked out of the pension scheme - is there a mechanism for you to buy an annuity at the previous government mandated rate (e.g. 6.8% or whatever the prevailing rate is) or are you just subject to the whims of the market.

I don't plan on working until I'm in my 60s, but at the moment, I get crappy returns in my pillar 2 and the only saving grace is the mandatory part gets a guaranteed 6.8% conversion rate upon retirement. Without that bit, it would just be a lose-lose.

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As far as I know, this is not possible with a vested benefits account. However, based on BVG Art. 47 or Art. 47a, it may be possible to stay insured with your pension fund or transfer to the Stiftung Auffangeinrichtung BVG after losing your job, instead of transferring to a vested benefits foundation. I'm not familiar with the details, though. Some options may depend on the regulations of your pension fund.



https://www.fedlex.admin.ch/eli/cc/1..._797/de#art_47

I checked: I'd have to transfer to a vested benefit account. I guess it is not such a big deal, the amounts can be invested and alternative provisions made.

I am not sure you understand what the conversion rate means. It is not any interest, profitability or anything like that. It just means that if you have cumulated X francs, you will get 0.068X francs per year as a pension.

New law is now that as of 58 if you are fired the company is obliged to keep you in their pension fund if you choose to remain in it.

It's an annuity. But the rate is pretty good. I'm not sure what you can get in the open market, but I suspect it is much lower than 6.8%! I anyway doubt that the conversion rate will still be 6.8% when it is time for me to retire.

It's clearly higher than the actual return. That's why pillar 2 is turning into a partial transfer scheme like the AHV, the working generation are forced to support the pensioners with about 10 billion annualy currently, an amount that keeps increasing.

As a result, the parliament's intent is to lower the conversion rate to 6%, but the details (transition phase) are yet to be defined. And as usual the left would rather kill the entire thing by blocking this, instead of adjusting it to make it last and no longer suck out the working generation.

Actually, 6.8% is a terrible return. Why? Because the pension is not indexed with inflation, it quickly loses value in an environment like today.

But be aware, that the pension fund may cap your interest rate to 1% if you are in this ‘External continued participation”. So way below the good returns from previous years benchmark as an employee

From a practical point of view, the issue is not whether the returns are terrible but rather where, if anywhere, you can do better elsewhere and with an acceptable risk.