Personal pension planning and life insurance are much more than an investment: they are a safety blanket for your family and assets and, if you are an entrepreneur, they ensure the continuity of your business. Here we look at the benefits of some of the different solutions available.
A personal pension plan supplemented by a life insurance policy enables you to make arrangements for your financial security and your savings. There are advantages to be had even on simply taking out these plans and policies, not only after retirement. These schemes have several objectives:
1. Protection of assets and family: through personal pension planning, you can set up an additional savings account that you can access on retirement. After you die, these savings provide financial stability for remaining family members. These savings help to preserve the assets that you have accumulated. 2. Business protection: the right coverage ensures the longevity of the business in the event of the loss of a key manager, circumnavigating potential financial disputes and ensuring that the business remains stable and a going concern. 3. Tax optimisation: you enjoy tax benefits of the tied pension provision (pillar 3a) with income tax-deductible premiums. This is an effective solution to bolster your protection and provide tax relief at the same time. 4. Business transfer management: life insurance allows you to structure the transfer of your business by facilitating an acquisition of shares or a business succession. It is a tool that provides stability for both your successors and your business partners.
Approximately 42% of SMEs are transferred to a direct descendent, 11% to another relative and 23% to employees or partners on the board of directors who are not family members, according to the report ‘Survey on business succession 2022’, published in September 2023 by Credit Suisse.
Why not offer this benefit to your employees? A workplace pension is an effective way to create loyalty and earn employer attractiveness. It demonstrates to your employees that their well-being truly matters to you.
The 3rd pillar pension provision encompasses several financial and insurance products designed to supplement the services provided by the other two pillars (old-age and survivors’ insurance/disability insurance and occupational benefits insurance). It may cover life insurance policies, as well as savings and investment solutions, with or without tax benefits: - Tied Pension Provision (Pillar 3a): this product is tax-sheltered and falls under the personal pension planning encouraged by the Swiss state. Premiums paid in are income tax-deductible, under a set annual threshold. Funds are usually frozen for up to five years before normal pension age (except in special cases: real estate purchases, relocation abroad, etc.). - Flexible Pension (Pillar 3b): more flexible than the 3a pension provision, this lets you choose exactly how much and how frequently to make payments. This fund can be accessed at any age. Premiums are not tax-deductible, but depending on the Swiss canton, the 3b pension scheme may provide tax relief on return and capital at maturity. It also allows you access to the capital at any time, with no age restrictions or special conditions.
Life insurance can be used to supplement a personal pension solution or be taken out independently in its own right. There are several types available: - Life Insurance (or Pure-Risk Cover): the insured capital is paid out to named beneficiaries in the event of the policyholder’s death. This type of policy is usually chosen to insure the family's financial protection, to cover a mortgage loan or to provide security to heirs. - Savings and Investment Insurance (or Combined Insurance): this type of insurance combines insurance and savings coverage. A portion of the premiums is invested, allowing the policyholder to build up a pension fund. If the policyholder dies, beneficiaries receive the insured amount or the amount accrued (depending on the terms of the policy). On the maturity date of the policy, the savings accrued are also paid out to the policyholder.
To mitigate the risk of business interruption, companies can take out specific insurance policies to supplement the personal solutions mentioned above:
- Key-person insurance: this protects the business in the event of the death or temporary or permanent incapacity (illness or injury) of a business owner or employee who is key to the normal running of the company. Their absence is likely to cause a decrease in turnover, or may even cause operations to cease. Key-person insurance provides cover for potential financial losses from, for example, operating losses, repayment of bank loans, etc. It helps to preserve the trust placed in the business by partners (such as clients, suppliers or financiers). - Partnership insurance: this was designed to protect the financial interest of a company's partners or stakeholders in the event of the death, incapacity or retirement of a key partner. This type of insurance facilitates the acquisition of the shares of a partner in the event of their death or incapacity, allowing the stability and continuity of the business to remain intact, without external intervention. In addition to the stability and continuity of the business, it also provides security to partners’ families by guaranteeing them fair financial compensation.
Our teams are by your side to guide and advise you, entirely independently, in choosing the right life insurance for you.
Life insurance is an ideal complement to any financial planning, but needs to be chosen carefully to ensure it suits YOUR needs and end-goals. - What are my end-goals? Establish whether your aim is to protect your family (when you die) or to build up a pension fund, etc. - For how long and how much can I commit to? Life insurance is a long-term financial commitment, so it is important to choose a sensible premium amount based on your situation. - What are the terms and conditions of your chosen life insurance policy? Some of the terms and conditions need careful consideration, particularly the termination options. Life insurance policies may incur significant surrender charges in the event of early termination. Our teams are by your side to guide and advise you, entirely independently, in choosing the right life insurance for you.
This decade is host to a huge number of business executives and shareholders on the verge of retirement age. These are the “baby-boomer” generation, born in the late 50s. So, the question as to how to best secure their private assets and preserve the continuity of the business after their departure becomes paramount. Their professional activities and personal finances are often closely tied, particularly in the case of SMEs. A business failure, poor risk management or an ill-prepared succession can have direct repercussions on their personal assets, their quality of life and that of their loved ones. Faced with these challenges, solutions such as life insurance, pension planning and appropriate legal arrangements are key to securing their assets and protecting their financial future. In business, insurance products also fund the acquisition of one partner's shares or key person cover, avoiding financial or succession crises.
First and foremost, a manager must assess their risks of death, incapacity, or of a succession dispute. It is also essential to anticipate cash flow needs to cover unforeseen events or the ongoing running of the business. Lastly, surrounding themselves with experts will ensure they find the right solutions for their situation.
Our holistic approach is what sets us apart, in which we combine insurance, tax and asset management expertise. We undertake an in-depth and neutral analysis of our clients’ situation so as to provide an accurate and unbiased diagnosis that suits their specific needs. This is our pledge as an independent insurance broker: to assist each and every client with transparency. Thanks to our leading position in Switzerland, with offices located across the country, we advise and assist our clients with equal effectiveness, no matter where they are. Jean-François André, Head of LPP – Qualibroker-Swiss Risk & Care Group.
This article was published in Insurance Inside n°36 - December 2024.
Jean-François André, Head of LPP – Qualibroker-Swiss Risk & Care Group
As an insurance broker covering all sectors, we offer complete risk coverage to companies, no matter what their size, with the best coverage/risk ratio.
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