Country Panel Presentation: Switzerland · Country Panel Presentation: Switzerland 2016 IGP Regional EMEA Seminar Windsor, May 24 -26, 2016 . Yvonne Eggmann . International Employee

© International Group Program

Country Panel Presentation: Switzerland

2016 IGP Regional EMEA Seminar Windsor, May 24-26, 2016

Yvonne Eggmann International Employee Benefits Consultant

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This presentation was exclusively prepared for the attendees of the 2016 IGP Regional EMEA Seminar. None of the contents of this presentation may be copied or disclosed to any other party or used for any other purpose than the one mentioned above without IGP's prior written permission.


Key Topics

Background Information

Country and Company Info &

Background

Social Security

Private Practice

Taxation Administration Legislation

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Country Information

• General Information Population 8,122 million (of which 24% are foreigners) 2,362 communities within 26 cantons Linguistically divided in 4 main regions:

‐ Swiss German (65%) ‐ French (22%) ‐ Italian (8%) ‐ Romantsch (less than 1%) ‐ other foreign languages (English, Spanish, Portuguese etc. 4.5%)

• Demographic Information Life expectancy at birth male/female 80.22 / 84.82 years Net employment rate (age group 15-64) 83.8% Unemployment rate 3.1%

• Economic One of the world's most stable economies One of the highest per capita incomes in the world Export goods machinery, chemicals, metals, watches, agricultural products Most businesses are small or medium-sized

(Source: Federal Statistical Office FSO)

Switzerland

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http://en.wikipedia.org/wiki/File:Europe-Switzerland.svg


Company Information

• AXA Group Among the world's largest insurers 102 million clients worldwide 91.2 billion euro in business volume 4.7 billion euro operating result 161,000 employees (including field sales

staff) Business in 59 countries

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Value Proposition

• AXA Winterthur A tradition dating back over 100 years 1.87 million private and corporate

clients CHF 11.7 billion in business volume More than 4,000 employees plus

approx. 2,650 partners in sales that work exclusively for AXA Winterthur

Switzerland is a core market within AXA Group

Market share in 2015: ‐ Life insurance 30.1% ‐ Property & Casualty 12.9%

AXA Winterthur is the leader in the Swiss insurance market

AXA is a dynamic and innovative company with one of the most valuable brands in the

world.


Key Topics


Social Security

Summary of Social Security

Benefits

Private Practice


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The Swiss Pension System

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Needs-oriented pensions

* with additional tax credits

Three-pillar system

Pillar 1

State pension

Ensure minimum standard of living

Supplemen- tary benefits

(EL) AHV / IV

Pillar 2

Occupational benefits

Maintain current standard of living

Extra- mandatory insurance

Mandatory insurance BVG/UVG

Pillar 3 Private pensions

Provide individual supplements

Flexible pensions (Pillar 3b)

Tied pensions* (Pillar 3a)

Mandatory Voluntary


The Swiss System

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Value Proposition

Age Death Due to illness or accident Disability Due to illness or accident

Retirement pension

Child's pension

100%

40%

Widow's/widower's pension

Orphan's pension

80%

40%

Disability pension

Child's pension

100%

40%

As a percentage of retirement/disability pension (min. CHF 14,100 / max. CHF 28,200)


Salary deductions

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1st Pillar AHV / LPP State Pension

AHV contributions 4.2 %

IV contributions

EO contributions

ALV contributions

UVG contributions (non-occupational accidents) (as per insurance policy)

4.2 %

0.7% 0.7 %

0.25 % 0.25 %

1.10 % 1.10 %

Employee Employer

Pay-as-you-go system


The Swiss Pension System

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The 2nd Pillar / BVG

* with additional tax credits

Pillar 1

Pillar 2

Three-pillar system

Ensure minimum standard of living

Supplementary benefits

(EL)

State pension

AHV / IV

Maintain current standard of living

Extra- mandatory insurance

UVG- Z/ KKV

Occupational benefits

Mandatory insurance

BVG/ UVG-O

Flexible pensions (Pillar 3b)

Tied pensions* (Pillar 3a)

Private Pension


Pillar 1

Pillar 2 Pillar 3


*

BVG Benefits, 2nd Pillar

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Payable in case of sickness

Old Age Death Due to illness Disability Due to illness

Retirement pension

Child's pension

100%

20% of retirement pension

100%

Surviving spouse's pension

Orphans' pension

60% of disability or retirement pension

20% of disability or retirement pension

Disability pension

Child's pension 20% of disability pension


* The minimum pensionable BVG salary for persons earning an income that lies between the enrollment minimum of CHF 21,150 and CHF 28,200 is always CHF 3,525.

Salary components in excess of the BVG maximum are not insured under Pillars 1 and 2.

AHV salary 21,150 20,151 28,200 52,200 84,600 100,000

Coordinated salary = BVG salary = Pensionable salary

CHF 84,600

3,525* 3,525*

21,150 24,675 21,150 24,675

27,525

24,675

59,925

24,675

59,925

15,400

CHF 24,675

First contribution payment for disability and survivors' benefits (risk premiums)

First contribution payment for retirement insurance (saving process)

January 1 January 1 Age 17 18 19 20 21 22 23 24 25

Which salary and who is insured?

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Benefits and Costs

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Men 25 35 45 55 65

Women 25 35 45 55 65

7%

15%

10%

18%

Retirement Pension: Total retirement credits + Interest * = Retirement assets x Conversion rate = Annual retirement pension (Retirement assets can be paid out in a lump sum if the regulations include this option)

*Interest: as of 01.01.2016 as per ordinance of Federal Council: 1.25%

Risk Contribution (in percentage of the insured salary ) Disability + survivors’ benefits on average 3.0% Expense loading on average 0.5% Security fund + Inflation on average 0.3%

Level premium system


UVG Benefits, 2nd Pillar

• As a percentage of UVG salary (max. CHF 148,200)

• In coordination with AHV / IV and BVG up to a maximum of 90% of

• the pensionable salary (complementary pension)

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payable in case of accident

Death Due to accident

Disability Due to accident

Widow's/widower's

Orphans' pension

40%

25%

Half orphans' pension 15%

Daily benefits

Disability pension

80%

80%

+ allowance for physical or mental impairment

Private Pension



Overview of Benefits

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Example for a pension gap


Key Topics


Social Security

Private Practice

Customary Private Employee Benefits


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Funding Vehicles

• Small-sized (<20 members) & Medium-sized (>20 members) companies plus reinsurance contracts

• Full-service ("all-in-fee")

• Delegation to Foundation of Investment Risk coverage Administration

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Collective BVG Foundation


Funding Vehicles

• Autonomous solution Medium-sized (<100 members) & Large-sized companies (>100 members) Risk benefits 100% reinsured with insurance company Investment managed by the board of foundation Administration

‐ outsourced or ‐ self-administered

• Fully autonomous solution Large companies In order to reduce the risk of high claims

‐ Smart Protection ‐ Stop-Loss ‐ Excess-of-Loss

No reinsurance usually with an average number of 2,500 insured

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BVG Foundation


AXA's semi-autonomous products with added freedom

Interest

Investment INSURER determines investment strategy

Death and disability

Life Swiss Life, Allianz, Basler, Helvetia, Pax

Insurance at full value


Pooled investments

Semi-autonomous solution

Interest

Investment FOUNDATION**

determines investment strategy


Investment per pension fund Client Invest SwissLife, Helvetia, Zurich Vita

Interest

Investment FOUNDATION



Autonomous solutions

ASGA, COMUNITAS, Gemini, Transparenta, CIEPP, Profond

Interest

Investment PENSION FUND chooses investment

strategy


Group Invest Swisscanto, PK pro, PKG

* Dual Invest: 40% of pension assets are reinsured with AXA Life Ltd., 60% are pooled by the foundation and broadly diversified. ** Investment strategy: Pension funds can select some parts directly.

Return defined or generated by the life insurance company Return defined or generated by the foundation

Conversion rate Conversion rate Conversion rate Conversionrate Conversion rate

Retirement benefits Retirement benefits Retirement benefits Retirement benefits Retirement benefits

Interest

Investment FOUNDATION**



Conversion rate

Retirement benefits

Pooled investments

Zurich Vita, Group Mutuel, SwissLife, Basler Perspectiva

Dual Invest

Interest Interest

Investment FOUNDATION*


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Additional Benefits

Basic Plan

How to Create a Multinational Plan

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Analysis of employee universum within the

company

> 40% not Swiss citizen, therefore not fully contribution years to the first pillar

(AHV)

Lower expected benefits from the 1st pillar

Plan Design without coordination deduction for basic salary

Coordination or not? How do I define the salary structure?

Salary

450'000

167'040

60'000 60% of employees

Plan Design without coordination deduction for basic salary


Sample Multinational Plan

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Plan Design Basic Plan Additional Benefits Pension Base Based on salary (without

coordination deduction) up to 200% of BVG pensionable salary = CHF 169'200

Basic salary coordination deduction of CHF 169'200

Pension Design based on age

20-34 12% 14%

35-44 14% 14%

45-54 16% 14%

55-65 (64) 18% 14%

Disability Pension 50% of insured salary 60% of insured salary

Spouse's Pension 35% of insured salary Lump sum 3x insured salary, add. accrued capital

Children's Pension 10% of insured salary none

Independent Life Capital 2 x insured salary 3 x insured salary

Employee Financing 6% of insured salary 7% of insured salary

1st and 2nd Pillar max. insured benefits: Should not exceed 85% of the last salary


Key Topics


Social Security

Private Practice

Customary Private Employee Benefits:

Type & Level of Benefits Plan

Design / Trends


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Trends / Slogan

Changes in the Insurance Environment

Conversion Rate

Semi autonomous Solutions (off Balance)

Flexible Retirement

Choice of Plan Design

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Trends

• There have been numerous structural changes since the introduction of the BVG in 1985

Changes to the BVG Environment

Active insured persons are subsidizing pensioners.

We are living longer The life expectancy of 65-year-olds has risen by 5 years since the start of the 80s. That's almost 35%. In other words, the money has to last for 35% longer.

Interest rates have been historically low for years now

Interest rates on secure investments have been less than the BVG minimum interest rate for years.

Regulation limits scope for action

More stringent solvency requirements demand very security-oriented investments and increased levels of capitalization, further restricting the earnings potential for insured persons.

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AXA's semi-autonomous collective foundations Needs of SMEs

Security oriented investment

Conditions by Board of Trustees

A great deal of freedom

Board of Trustees with autonomy

Semi-autonomous solutions offer more freedom for added performance and attractive premiums

Future-oriented benefits

Cost-consciousness

Security and delegation

Strong expertise in investments and

processes

Advantages

Attractive interest and retirement benefits Target interest rate above the BVG rate

Attractive risk and cost premiums

Added performance

Cost advantage

Semi-autonomous Solutions (Off-Balance)

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Conversion Rate

• Definition The conversion rate refers to the rate that is used when converting

accrued retirement assets into a pension. The conversion rate depends on the

‐ annuity term of future pensions (life expectancy) ‐ contingent rights that are included (e.g. spouse's pension)

technical interest rate (earnings expectations)

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Conversion Rate

• Trends in the conversion rate

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What needs to be considered next?

Influencing factors Possible scenarios

Government Effects of pension reforms for 2020 Conversion rate for BVG mandatory benefits remains subject to policy debates.

Financial markets, interest environment

Fluctuating equity prices New crisis (euro) Horizontal movement (Japanese conditions) Rising interest rates Continuing stagnation at low levels

Life expectancy Continues to rise Is stagnating

Supervision Change in solvency rules

The trend in the conversion rate depends very much on how interest rates develop and it is therefore impossible to make a conclusive statement.


Longevity

• Mandatory Conversion Rate

• Step-by-step reduction of conversion rate from 7.2% to 6.8% in 2014

• The Federal Council may determine different conversion rates for the first 10 years after the 1st BVG/LPP revision has entered into force

• The Federal Council will issue a report every 10 years, for the first time in 2011, on the basis of which the conversion rate will be reviewed

• Extra-Mandatory Conversion Rate All in fee solution as per 2015: 2016:

‐ Male aged 65: 5.604% new 5.385% ‐ Female aged 64: 5.480% new 5.262%

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Evolution of Conversion Rates


Flexible Retirement

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A Schematic Example

Deferred retirement Partial retirement

58 59 60 61 62 63 64 65 66 67 68 69 70

Reduction to 70% - first step

(pension / lump sum)

Reduction to 50% - second step


Full retirement - fourth step (pension / lump sum)

Reduction to 30% - third step


Regular retirement age


Choice of Different Plan Design

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A Schematic Example

Plan 1 = Standard Plan 2: + 2% Plan 3: – 2%

Employer Employer Employer

7%

10%

8%

11%

7%

10%

8%

11%

7%

10%

8%

11%

4%

7%

5%

9%

6%

9%

7%

11%

2%

5%

3%

7%

Employee Employee Employee


Key Topics


Social Security

Private Practice

Taxation

Taxation of benefits

contributions

Administration Legislation

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Fiscal Treatment

AHV salary

BVG contributions

AHV IV / EO

contributions

No tax

Taxed as income

Retirement assets

Taxed as income on a reduced basis + Taxed as capital

AHV

BVG Taxed as income

Pensions

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Key Topics


Social Security

Private Practice

Taxation

OBC

Internet platform Client Tools

Administration Legislation

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Occupational benefits fund commission (OBC)

• All companies affiliated with the collective foundation must have an occupational benefits fund commission (OBC), which is responsible for making any changes to the benefits fund regulations, financing of pension benefits, and allocating the fund’s disposable assets. It also monitors employees’ insurance applications and contribution payments, and it is involved in reviewing claims and terminating the affiliation contract by the employer.

• The OBC manages the occupational benefits insurance.

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OBC


Administration of Plans

• Online Platform "wincolink" online client service - 24/7 access information on contracts and insured person comprehensive overview of all the relevant forms and documents

• Transparency The principle of transparency in the contribution system, financing, capital investments and accounting

should observed fulfill the duty to provide information to the insured Board Foundation should be able to perform its management function on the basis of equal employer

and employee representation

• myAXA – AXA's client portal Overview of insurance contracts and their relevant documents Entry of claims and service inquiries Notifications of new documents Communication in the event of a claim and other messages from AXA Issuing access rights for employees is possible Administration of contracts

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Key Topics


Social Security

Private Practice

HEALTH Claims

Management


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The Swiss Health Care Market -

• Switzerland has: One of the best and most expensive health care systems worldwide

61 health care providers (2013; 1996 = 145) Health costs: Total: CHF 58.3 mia. (2008), where of CHF 22.6 mia. LAMal/KVG

‐ Costs per person: CHF 253.-/mth ‐ Premium per adult: CHF 261.-/mth ‐ Level: 11.4% of GDP (2008/2009) ‐ Growth: + 56% (1996-2008)

Switzerland has one of the largest private healthcare sectors in the world 4 main cost elements:

‐ Out-patient treatments by doctors + hospitals

‐ In-patient acute treatments ‐ Stationary long-time care ‐ Costs for drugs

…in international comparison

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The Swiss Health Care System

• The system consists of 2 parts: Basic / mandatory cover = Social Security (KVG/LAMal) Supplementary / optional cover (VVG/LCA)

‐ Closes gaps of basic cover (e.g. abroad) ‐ Group discount may apply

• The basic cover is mandatory: For everyone living and/or working in CH

• Cover irrespective of age + personal health situation! (no medical underwriting) Lifetime cover! Deductible is mandatory (CHF 300 - 2’500/year) Discount up to 48% is possible

Managed care models are available Discount up to 18% is possible

• Good level of coverage with basic cover: In- and out-patient benefits But: the basic cover has its limits (e.g. cover abroad/outside EU/EFTA,

alternative medicine, non-listed drugs, semi-private / private room)

Mandatory cover for everyone

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The Swiss Health Care System

• Area of cover: Intended area of cover (for basic) = Switzerland Abroad: emergencies are covered:

‐ for basic cover ‐ for suppl. cover: automatically included

Elective treatment abroad: possible with semi-private/private hospital cover

• Medical underwriting Basic cover: everyone is accepted into cover Supplementary cover: medical questionnaire needs to be filled in

• The tariff is individual based: ( not a group ratification!) Premium calculated per person (based on age + city of residence) Fix tariff structure ( no risk or past claims dependency) - not tax based or financed by employers Risk sharing among all Swiss medical insurers ( National risk equalisation)

• Who provides health care: Basic / mandatory cover = special license necessary / Social Security Supplementary cover = provided by same providers Private insurers do not offer health care Accident cover: must be included in health care for people without employer; employed people must

be covered by their employer

Mandatory cover for everyone

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Group medical plans for companies

• Companies may conclude group medical plans for their employees: voluntary / additional services Employees may participate / don’t have to Premium payment may be done by employer or employee (for whole family)

• Advantages: Discount on supplementary coverages ( no discount on basic/mandatory cover

allowed) Discount applies also to employee’s family members ( spouse/partner and children

up to age 30 / with Sanitas) Very flexible solution: each individual may have own cover Very flexible contribution: employer may pay:

‐ the whole Plan ‐ a certain amount ‐ a percentage ‐ a product / package ‐ etc.

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© International Group Program 40

Corporate Health Management Health as competitive advantage

© International Group Program 41

Corporate Health Management

• Additional employee motivation

• Increased productivity

• Fewer absences

• Objectives Prevent illness among your employees in the long-term Enhance health awareness and personal responsibility through targeted

training Programs sustain your employees’ motivation and commitment Continue improving your processes and working conditions Reduce payroll and insurance expenses


Key Topics


Retirement System 2020

reform

Social Security

Private Practice


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Legislative Update

• Structural Reform Pension Fund Governance - Design, management and control of a

pension fund Transparency in the management of pension funds Independence of the regulatory authorities

• Pension Reform "2020" Retirement age of 65 (female and male) Flexibilization of retirement Adaptation of the BVG minimum conversion rate (6,8% to 6,0%)

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www.axa-winterthur.ch

Contact Info

Yvonne Eggmann International Employee Benefits Consultant

+41 58 215 51 14 [email protected]

AXA Winterhur

Documents

Country Panel Presentation: Switzerland · Country Panel Presentation: Switzerland 2016 IGP Regional EMEA Seminar Windsor, May 24 -26, 2016 . Yvonne Eggmann . International Employee