je connais mon banquier je connais mon banquier Financial security for your life ahead Pension planning

Transcription

1 Financial security for your life ahead Pension planning

2 BCGE financial pyramid To advise and help you through the major financial decisions in your life, Banque Cantonale de Genève has developed a wealth philosophy that allows everyone to balance their economic situation and harmonise it with their financial means, taking account of their inclinations, their personal projects and the stage of life they are at. The food pyramid The appeal of the food pyramid lies in the fact that it provides a template for healthy eating. It shows the various food groups, and the relative proportions for each: those at the base are depicted in greater quantities, with volumes diminishing the higher up the pyramid you go. Any imbalance, especially at the lowest levels, will jeopardise the integrity of the whole structure. The pyramid encourages people to consume a wide variety of foods in a balanced way, so as to obtain all the nutrients they need for good health. The philosophy s main purpose is to help you build, safeguard and generate returns from your assets, while making allowance for all the factors that have a bearing on these decisions. It is a highly innovative and practical technique, allowing you to distinguish effectively between your day-to-day money needs, your longer-term financial security, and the way you use and manage your assets. From cash to investments, BCGE can suggest innovative ways in order to help you to achieve your financial goals. 2

3 Cash/liquid assets BCGE Praevisio contents A private account provides a small, flexible pool of funds with which to make payments. The balance should not exceed more than two months salary or pension income, as it earns very low rates of interest. Any accumulated surplus would be better deposited in some form of savings account. The Swiss pensions system 5 Our concept: BCGE Praevisio 8 Savings A good average balance for this account would be three or four months salary or pension, though you can adjust this depending on your own personal plans. Why you need to analyse your pension provision 9 BCGE s pension solutions 10 Selection of the best pension products 14 Glossary 15 Pension planning At this level, you are shifting your sights towards a more distant horizon. Financial planning for the future involves building up funds for retirement or, for many people, the second active life. Investments Investing your available movable capital assets occupies the very top of the pyramid. Once the basic needs (cash, savings and pension planning) have been fully optimized and provided for, you can adopt an investment strategy for the remainder of your assets. Financing Finally, if you wish to resort to mortgage loans for the acquisition of real estate assets or obtain Lombard loans, these two aspects must be taken into consideration during the financial optimization process. 3

4 What does the future hold in store for us? This is a question we all ask ourselves from time-to-time without really being able to answer it with much conviction. In any event, it is vital to ensure your family s and your financial futures are secured, by guaranteeing income streams that will offer protection against the unexpected events that lie in store for us during our lifetimes. Banque Cantonale de Genève s answer is encapsulated in a single concept: BCGE Praevisio. This concept will stay relevant for you at every key stage in your life and provide you with the reassurance of secure financial independence once you decide to retire. You and your family stand to benefit from effective protection against those eventualities related to growing old, illness, accidents or the unexpected. 4

5 The Swiss pensions system In Switzerland, provision for retirement is founded on the principle commonly referred to as the three pillars. This combines State, occupational and personal pensions as well as social-welfare insurance provision. The first two pillars should enable you to maintain your standard of living and lifestyle to a reasonable degree, whereas the third pillar will allow you to top up these income streams to levels you consider desirable. This makes the third pillar a crucial optional component of your future financial security. Pillar 1: AVS/AI/PC State pension Minimum guaranteed for basic living standards AVS AI Supplementary benefits Pay-as-you-go system Three pillar system Pillar 2: LPP Occupational pension Maintaining previous lifestyle Compulsory occupational pension (LPP) (Pillar 2a) Occupational pension going beyond compulsory minimum (Pillar 2b) Pre-funded system Pillar 3 Personal pension provision Tied pension (Pillar 3a) Individual top-up Flexible pension (Pillar 3b) Pre-funded system Discover the Swiss pension planning guidebook written by P. Novello in close collaboration with A. Gallegos, head of the BCGE Pensions advisory unit. This publication (in French language) explains in simple and real terms, how to prepare your life plan and optimize your pension. 5

6 Pillar 1: AVS (Old-Age and Survivor s Insurance) State pension The purpose of the first pillar is to ensure vital needs are covered. The pension scheme is funded by what is commonly referred to as a pay-as-you-go system: contributions into the scheme by those who are working are used to pay out pensions to beneficiaries (those who have retired, surviving dependents, widows and widowers, and the disabled). Pillar 2: LPP (Swiss Federal Law on Occupational Pensions) Contributing to an occupational pension scheme, which forms the second pillar, is compulsory for all employees paying into AVS who earn above a set minimum threshold 1. This is intended to enable retired people, surviving dependents, widows and widowers, and the disabled, in conjunction with their 1st-pillar benefits, to maintain a reasonably decent standard of living. This may not be enough though, and it would be prudent to open a 3rd-pillar scheme. 6

7 Pillar 3: personal private pension A personal private pension scheme constitutes the third pillar. This should make it possible to plug any gaps in pension benefits from the first two pillars as well as providing additional finance depending on those goals freely set by the person in question. There are two types of third-pillar scheme: type 3b (funds available at any time) and type 3a (funds available on retirement). Premiums paid into type 3a tied schemes benefit from income tax relief up to a set maximum threshold 2. Through such a personal pension, you can reach your individual goals in a quicker and easier way, while making due allowance for your needs and your budget. Benefits as a % of annual pay Pension shortfall 60 2nd-pillar LPP pension ,150 3 Single-person 1st-pillar AVS pension 84, Income in thousands in CHF The chart illustrates the levels of statutory pensions (1st and 2nd pillars) as a percentage of the final salary paid to someone reaching retirement age. The higher your income is, the less effective the State pension will be in ensuring you will be able to maintain your pre-retirement standard of living. This helps to show more clearly how important a personal private pension scheme to close any pension shortfall or gap is so you can maintain the standard of living and lifestyle you enjoyed before you retired. 1 All employees who pay AVS contributions who earns a gross annual salary above a given threshold (for information: CHF 21,150 for 2017) are compulsorily insured 2 For more information, please see our Payment and other services brochure 3 Figures given for information (data valid for 2017) 7

8 Our concept: BCGE Praevisio Banque Cantonale de Genève has devised an innovative concept founded on analysing your personal circumstances and selecting, with complete impartiality, the best pension and insurance products on the market. What is the main purpose behind this? To provide you with valuable advice to allow you to forge your financial independence whatever your goals: guaranteeing your income streams, protecting your family, building up your wealth, optimising your tax bill, etc. Wealth and assets Your goals Optimisation Security Purchase of property Run-up to retirement Tax Loss of Retirement Inheritance Disability Death considerations earnings Our BCGE Praevisio concept Analysis of pension provision Pinpointing your pension provision needs Our personalised pension solutions 8

9 Why you need to analyse your pension provision? To provide security for you and your family s future, it is vital to undertake a detailed analysis of your personal circumstances. So, at every key stage in your life and depending on how complex your personal circumstances are, your BCGE adviser will suggest the level of analysis best suited to your needs and expectations in order to answer key questions such as: Is my insurance cover right? Are my sources of income providing enough? How can I build up my wealth and assets while also lightening my tax burden? What benefits will I be entitled to if I am incapacitated after illness or an accident? Would my family and loved ones be financially secure if I were to die? Could I retire early? How should I draw down the assets I have built up in my occupational pension scheme: annuity or lump-sum? Working on the basis of your family s and your current circumstances, your personal adviser supported by our pension planning experts, will conduct a personalised analysis of your pension provision to assess your needs in terms of pension cover. Your adviser will suggest a tailor-made package comprising, in particular, a selection of the best pensions and social-welfare insurance products available on the market. 9

10 BCGE s pension solutions Using the findings from the analysis, Banque Cantonale de Genève will propose a comprehensive range of secure, competitive and completely independent pension and social-insurance solutions: Pillars 2 and 3 Personalised analysis of pension provision Occupational pension (type 2a) Tied personal pension (type 3a) Libre Passage savings account Epargne 3 savings account Synchrony LPP family of multi-manager investment funds Flexible personal pension (type 3b) Selection of the best pension products: Pure risk insurance Fund-linked life insurance Life annuities 10

11 Libre Passage savings account The Libre Passage savings account temporarily allows you to place your 2nd-pillar vested in occupational pension assets, after terminating your employment contract or when changing to a job with a new employer 4. This account allows you to secure a preferential rate of interest on your capital until you can transfer your pension assets to another pension scheme. It also gives you the opportunity, depending on your investment approach and appreciation of risk, to invest in the Synchrony LPP multi-manager investment funds. We would advise you to take out an insurance for your Libre Passage account to cover you against death and/or invalidity to shield you against any unforeseen inability to take gainful employment. Your advantages Your assets can earn a preferential rate of interest that is higher than the savings accounts You can have capital available five years before the statutory retirement age You have the opportunity to top up any collateral security needed to underpin financing for any real-estate projects You have the opportunity to finance the purchase of your home under the access to home-ownership scheme You can also take advantage of the opportunity to generate returns in the long term by investing in Synchrony LPP B fund units (pension-related) Once you reach the official age of retirement, it is possible to convert to Synchrony LPP A fund units (not pension-related) 4 In accordance with the Implementing Ordinance dated 3 October 1994 on Vesting in Pension Plans (OLP) relating to the Law on Occupational Retirement, Survivors and Disability Pension Plans 11

12 BCGE s pension solutions Epargne 3 savings account The Epargne 3 savings account is the ideal way to secure your financial future and plug any gaps in your 1st- and 2nd-pillar pension cover. It allows you to underpin your retirement depending on your financial possibilities while making savings on your tax bill. The account offers you considerable flexibility for deposits, preferential interest rates and the opportunity, depending on your investment approach, to invest in markets through units in the Synchrony LPP multi-manager investment funds. Your advantages The annual amount 5 paid into your Epargne 3 account is tax-deductible You have the opportunity to top up any collateral security needed to underpin financing for any real-estate projects You benefit from a preferential interest rate that is not liable to withholding tax You can also take advantage of the opportunity to generate returns in the long term by investing in Synchrony LPP B fund units (pension-related) Once you reach the official age of retirement, it is possible to convert to Synchrony LPP A fund units (not pension-related) 12 You can accumulate a bonus interest rate of up to 0.5% a year on your BCGE Epargne account courtesy of our BCGE Avantage service loyalty scheme 6 Pension savings plan This pension savings plan gives you the opportunity to build up your pension capital without thinking about it. Your advantages Making regular monthly savings from CHF 100 upwards Automatically invested in one or two Synchrony LPP Funds No upfront plan-opening charge or management fees Synchrony LPP multi-manager investment funds These funds are managed by our BCGE Asset Management team. These investment vehicles are ideally suited for growing your pension assets over the long term. The Synchrony LPP Funds not only reflect the BCGE group s investment philosophy but also comply with the requirements of the Federal Law on Occupational Pensions (LPP) and its Ordonnance (OPP2, Articles 53 and 54). This involves disciplined selection of the best investment funds worldwide, chosen with the complete impartiality.

13 The purpose of the Synchrony LPP family of multi-manager funds is to make it easier to generate a regular growth in your pension pot while limiting risks through optimum diversification of investments depending on the investment profile. The funds are managed by professional fund managers who monitor, day in day out, how investments are performing and what is happening on financial markets. Depending on your own personal circumstances and pension goals, your BCGE adviser will work with you to establish the risk profile best suited to your needs and expectations: Profil Conservative Defensive Balanced Balanced SRI 6 Dynamic Investment goals Favours safeguarding capital and generating income from bonds Favours safeguarding capital and generating yield Seeks a balance between fixedincome securities and capital gains Seeks a balance between fixedincome securities and capital gains while favouring sustainable assets NEW Emphasis on generating capital gains while maintaining a minimum level of investment in bonds Risk propensity Below average Minimum fluctuation in capital Below average Minimum fluctuation in capital Average Fluctuations in capital as low as possible Average Fluctuations in capital as low as possible Above average Allowance for important capital fluctuations Funds 5 Synchrony LPP Bonds Synchrony LPP 25 Synchrony LPP 40 Synchrony LPP 40 SRI Synchrony LPP 80 7 Investment categories AAA A AA BBB Cash Bonds Equities Swiss real estate Investment horizon Medium term Medium term Medium long term Medium long term Long term very long term 5 Because of the bond positions, investment funds are affected by movements in interest rates. Fluctuations in value may also occur because of their exposure to equities 6 Socially Responsible Investment 7 Share allocation of the Synchrony LPP 80 fund may reach or even exceed 80%, which is in line with the Swiss legislation on occupational benefits plans (OPP2) and represents a higher proportion than those encountered in traditional provision funds. The fund may experience important value fluctuations due to its high share exposure. This fund is suited for investors with a long or very long term investment horizon and a high risk tolerance. Source: BCGE 13

14 Selection of the best pension products Whatever your needs are in terms of cover pure-risk insurance, life annuities or guaranteed fund-linked life insurance Banque Cantonale de Genève can provide you with straightforward, competitive and tailor-made packages thanks to its impartial selection of the best products available in the marketplace. You will, therefore, be able to build up the capital you want, and enjoy a guaranteed annuity for life and to protect both yourself and your family against the risk of inability to work and/or death. Should you need a personal provision analysis and wish to benefit from expert advice on all topics of your pension planning, your BCGE advisor or one of the experts of our Pensions Advisory and financial planning unit will be pleased to assist you in this task. 14

15 Glossary AI Assurance-Invalidité (AI) is the compulsory State disability insurance covering the whole of Switzerland. Its purpose is to guarantee minimum means of subsistence for those insured people who have become incapacitated, with benefits in the form of services (rehabilitation assistance) or money (disability pension or allowances). Fund-linked life insurance Fund-linked life insurance enables you to combine arranging your pension cover with the prospect of earning an attractive return by investing in securities. It offers several tax benefits: under the flexible personal pension arrangements, income earned on these investments is not liable for either income tax or withholding tax, subject to certain provisions. Pure-risk insurance against death Pure-risk term life insurance provides a financial guarantee for the family or any other person designated by the person who takes out the insurance. Depending on their needs, the insured person selects the level of cover under the insurance, with a level or decreasing benefit paid out in the event of death. This sort of insurance can also be used as collateral security for a mortgage. If the mortgage loan is gradually paid off over the years, arrangements can be made whereby the premiums to cover the risk can be reduced each year by a set amount. With decreasing the life term insurance, the agreed sum insured for the first year of insurance diminishes by a fraction over the life-time of the contract. In the event of the insured person dying before the insurance term date, the capital still insured at the time of death is paid out to beneficiaries. If the insured person is still alive at the term date, no benefit is paid out. Pure-risk insurance against inability to work Insurance against a person s inability to work guarantees the insured person a replacement stream of income, in the form of a regular annuity, if that person is no longer able, for reasons of illness or accident, to undertake, either temporarily or permanently, their gainful employment. The sum to be paid out as a benefit will depend on the degree of incapacitation. This is calculated on the basis of the actual loss of earnings by comparing income earned from work before the incapacity occurred with the income still being earned or that might be earned after the incapacity occurred. AVS The Assurance-Vieillesse et Survivants (AVS) scheme, the Swiss State Old-Age and Survivors Insurance fund, has been in force since It has been amended several times. Together with AI, AVS forms what is commonly known as the first pillar of the threepillar Swiss pension system. AVS aims to guarantee minimum subsistence payments for beneficiaries. AVS is a compulsory State-run scheme. All those living or working in Switzerland are compulsorily insured under it. AVS pays out old-age and survivors pensions, as well as allowances for the disabled and supplementary payments for those already in receipt of old-age pensions. All those insured and their survivors are entitled beneficiaries. LAA Swiss Federal Law on Accident Insurance, dated 20 March This legislation relates to the compulsory State accident insurance scheme, a personal insurance to cover the financial consequences of accidents at work, non-occupational accidents and work-related illness. Benefits provided seek to redress damage incurred to health and ability to work in cases where those insured have had an accident or are suffering from a workrelated illness. Accident insurance provided under LAA is offered by SUVA (Swiss National Accident Insurance Fund) and accredited private insurers. LPP The Swiss Federal Law on Occupational Retirement, Survivors and Disability Pension Plans (LPP in French) relates to occupational pensions for employed workers, forming the second pillar of the threepillar Swiss pension system. The occupational pension scheme, in conjunction with AVS/AI 1st-pillar benefits, must enable those of retirement age, their survivors and the disabled to maintain their previous standard of living in an appropriate way. All employees who pay into the AVS scheme, starting from a minimum AVS pay threshold, are insured by their employers. The main benefits under LPP are the payment of retirement, widows /widowers and orphan pensions, as well as disability pensions. PC Prestations Complémentaires à l AVS et à l AI (Supplementary Benefits on top of AVS/AI) are made available if pensions and other incomes fail to cover essential needs. There is an entitlement to these, and they should not be confused with State or private-sector socialwelfare services. Together with AVS and AI, these Supplementary Benefits form a cornerstone of Switzerland s State welfare provision. Life annuities Life annuities are paid annually, half-yearly, quarterly or monthly up to the death of the person insured. In the case of life annuities with premium refund, beneficiaries designated in the contract will receive, after the death of the insured person, the premiums paid in less the amount already paid out in annuities. In the case of life annuities without refund, premiums paid in are retained by the insurer should the insured person die. In exchange, the insured annuity sum is higher. The life annuity continues to be paid as long as the insured person is still alive even if the total amount paid out in annuities exceeds the total sum of premiums paid in. Life annuities can, therefore, be regarded as a sort of retirement pension for the self-employed or as a top-up scheme for employed people s occupational pension cover. Pre-funded system This system involves pre-funding expenditure from future liabilities by building up a capital reserve of the commensurate amount. This means each contributor is building up their own savings. This approach implies reserves being accumulated, unlike the pay-as-you-go system which involves covering expenses as they arise through income. Pay-as-you-go system Benefits paid out to pensioners are financed immediately, each year, out of contributions made by insured working people, In other words, no reserves are mathematically accumulated, as income need only be equal to spending at the time. 15

16 Banque Cantonale de Genève Telephone: +41 (0) branches throughout Geneva Registered head office: Quai de l Ile 17 P.O. Box Geneva 2 Private Banking in Switzerland Quai de l Ile 17 P.O. Box 2251 CH-1211 Geneva 2 Avenue de la Gare 50 P.O. Box 159 CH-1001 Lausanne Lintheschergasse 19 P.O. Box 4068 CH-8021 Zürich 7173 / Banque Cantonale de Genève reserves the right to amend the fees, pricing and services outlined in this brochure at any time.