The Swiss government will now have to provide the pensions industry with a definition for ‘low-risk’ strategies after the obligation to provide guarantees when introducing individual risk choices in pension plans was dropped.

Switzerland’s so-called 1e-plans – which allow further individualisation of investment risk for people earning more than CHF126,000 (€116,500) a year – were introduced in 2006, but many Swiss companies have avoided the vehicle due to its mandatory guarantee. 

More than a decade later, the guarantee has been dropped, yet the law states that a “low-risk strategy” must be offered from 2017.

The government is now working on a decree defining the framework for this strategy.

Adrian Jones, director at PwC Switzerland, said: “It’s easy to get confused between risk and return, and this is likely to be part of the challenge with the new law.”

He quoted two of the most debated questions: “How do you define ‘risk’? And if something is negative, is that really low risk?”

He also cited the challenge of implementing “new strategies such as this in the current environment”.

However, he said he was convinced that the change in the law for 1e-plans would make them more attractive to companies in the long-run.

Willi Thurnherr, chief executive at Aon Hewitt Switzerland, agreed, saying it would “mainly be companies that will ask providers about 1e-plans”.

He said the model could help ease longevity and investment-risk pressures on Swiss companies.

“The 1e-plans are very close to the 401k plans in the US – it is a global trend, and the question is to what extent Switzerland can [avoid those pressures],” Thurnherr said.

In its survey, PwC argues that 1e-plans can “help companies reduce the risk of underfunding” and offer “potential defined contribution accounting under IFRS and US GAAP”. 


Both consultancies emphasised that, under Swiss law, individual choice can only be offered to people earning  CHF126,000 or more, around 20% of the population at the most.

Around 100 companies offer 1e-plans, named after the legal paragraph by which they are regulated, although Thurnherr said many providers had prepared solutions and were simply “waiting for the government’s final decree”.

For Jones, one hurdle for implementation has been Switzerland’s “tradition of collective pension plans”, with only limited or no individual choice – but he argued that “this is changing”.

Thurnherr said the low-risk strategy was likely to be used as a default for people who did not make an active choice.

And while members can switch between strategies, often on a monthly basis, the “admittedly very small data set in Switzerland suggests the vast majority will not change or only change once”, Thurnherr said.

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