So I looked at my pension and saw that it is structured as follows:

- Contributions from salary up to 150k are put into pension fund 1 (PF1)
- Contributions from salary exceeding that are put into PF2

I looked and a similar structure exists for other companies e.g. Credit Suisse.

Now what was interesting is that for PF2 and the equivalent for CS allows you choice of investments - whereas PF1 just gives interest (average around 2.7%) which accounts for why my pension fund did so poorly.

Anyone at CS able to say whether they have any choice for their lower limit pension fund?

What is the reason for this structure? I'm assuming it is somehow prescribed in law or made necessary to reduce risk as it is unlikely that 2 independent companies come up with such a similar structure.

__________________
By replying to this post, you hereby grant Phil_MCR a royalty-free license to use, in any way, anything posted by you on the internet. If you do not accept, stop using EF and delete your account.

An explanation on this type of structure here:
https://www.vermoegenszentrum.ch/wissen/1e-plan

Basically:
- up to certain amount your pension is part of the overall pension part (i.e. PF1 in your example). Upside of this is that you are guaranteed a minimum return (even if the pension fund should not be performing well at the time you cash out your pension). There are limits to what the pension fund can invest in, i.e. investment strategy is more conservative.
- certain companies have opted for a so-called 1e pension for its management / high earner tier. For the excess amounts, an employee can choose amongst individualized investment strategies (up to 10 to choose from, with at least one conservative strategy required), with the idea being that the employee can also choose more risky investments. The upside being that the risk/reward will be greater in the long-term. The downside is that if you draw your pension, e.g. if you retire or switch jobs, you will simply get the value of investments as they are then. In other words, you also bear the full risks.

In other words, while the normal pension approach has a collective insurance quality to it, the 1e approach is more akin to private investing (similar to what you are doing with your pillar 3a investments).

__________________
Liability for any statements hereinabove excluded! - Need a Swiss lawyer PM me.

And in this example (sounds very much like the pension scheme of one larger Basel company ...), PF1, even though a notionally labeled as defined contribution plan, guarantees a pension paid out monthly, PF2 only gives you a lump-sum upon retirement.

I have something similar, not banking. Don't remember the exact limits.

Same as you, for Plan 1 I cannot choose but I can for Plan 2.

Also, for Plan 1 I can choose between lumpsum and pension at retirement, plan 2 only lumpsum - which is another difference between the 2.

From what I recall it is not just the return that is involved, there is also the risk element and the requirement for the company to sub the pension fund in certain circumstance and the incapacity insurance.

PF2 may do better because it is less restricted in and there is less guarantee on it. But by the same token it can also a lot worse as happened to some pension funds back in 2007 and I can also recall that there were periods when PF2 returned almost nothing.

also interesting is whether these 2 plans are considered in total for various conditions.

for example, if i withdraw from PF1 to fund a house purchase, i would need to repay those amounts before making further voluntary contributions. i did wonder whether it would be a loophole to allow voluntary payment into PF2 if they are considered separate - but i expect all voluntary contributions are blocked until amounts are repaid.

or alternatively, if you make a voluntary payment into PF2 and extract from PF1 in the next year for house payment, whether the PF2 payment counts for the 3 year block, or whether voluntary contributions to only PF1 is considered. again, i suspect that they are considered together and the 3 year limit applies.

__________________
By replying to this post, you hereby grant Phil_MCR a royalty-free license to use, in any way, anything posted by you on the internet. If you do not accept, stop using EF and delete your account.

They are considered one totality for any aspects governed by the law for withdrawals and voluntary contributions etc.

PF2 is an overflow as far as I remember so you can't make contributions to it at all. Two common reasons for it's existence:
- Bonus payments put you over the PF1 limit
- When you transfer in your funds on joining there is too much to cover PF1

They are considered one but in mine, I can only make voluntary contributions to plan 2 if plan 1 is "full". Plan 1 also allows for early retirement build up.