Country Panel Presentation Switzerland. IGP Seminar Boston, September Yvonne Eggmann

Transcription

1 Country Panel Presentation Switzerland IGP Seminar Boston, September Yvonne Eggmann

2 Agenda AXA Winterthur Swiss Social Security System Second Pillar Funding Design of Benefits Plan Management of Assets Taxation Trends Question? 2

3 AXA Group Among the world's largest insurers 80 million clients worldwide 90 billion euro in business volume 3.5 billion euro operating result 216,000 employees (including field sales staff) 226 companies in 56 countries AXA is a dynamic and innovative company with one of the most valuable brands in the world. 3

4 The new brand a combination of strengths Very dynamic Bundled financial strength Strong innovator Very attractive internationally Strong expertise Very reliable Long tradition Steeped in Swiss values 4

5 AXA in Switzerland A tradition dating back over 100 years 1.6 million private and corporate clients CHF 10 billion in business volume 4,300 employees plus approx. 2,900 partners in sales that work exclusively for AXA Winterthur Switzerland is a core market within AXA Group Market share in 2009: Life insurance 26.2% Property and casualty 13.7% AXA Winterthur is the leader in the Swiss insurance market 5

6 Agenda AXA Winterthur Swiss Social Security System Second Pillar Funding Design of Benefits Plan Management of Assets Taxation Trends / Overview Question? 6

7 The Swiss pension system Needs-oriented pensions Three-pillar system Pillar 1 Pillar 2 Pillar 3 State pension Ensure minimum standard of living Occupational benefits Maintain current standard of living Private Pension Provide individual supplements AHV / IV Supplementary benefits (EL) Mandatory insurance BVG/ UVG-O Extramandatory insurance UVG- Z/ KKV Tied pensions* (Pillar 3a) Flexible pensions (Pillar 3b) * with additional tax credits 7

8 1 st Pillar State Pension AHV IV EL EO = FEDERAL OLD AGE AND SURVIVOR'S INSURANCE = FEDERAL DISABILITY INSURANCE = SUPPLEMENTARY BENEFITS (IN ADDITION TO AHV AND IV) = INCOME COMPENSATION REGULATIONS FOR MILITARY AND CIVIL DEFENSE SERVICE AHV / IV are compulsory state pensions that, together with the supplementary benefits (EL), must cover the basic needs of insured persons. EO covers claims by persons in service (Swiss army, women's military service, civil defense, and Red Cross) for compensation of lost earnings. 8

9 Overview of AHV / IV Benefits 1 st Pillar / State Pension Age Retirement pension 100% Child's pension 40% Death Due to illness or accident Widow's / Widower's pension Orphans' pension 40% 80% Disability Due to illness or accident Disability pension Child's pension 40% 100% As a percentage of retirement/disability pension min. CHF 13,920 / max. CHF 27,840 9

10 Overview of Salary deductions 1 st Pillar AHV / LPP State Pension Employee AHV contributions 4.2 % Employer 4.2 % IV contributions EO contributions ALV contributions UVG contributions (non-occupational accidents) 0.7% 0.7 % 0.25 % 0.25 % 1.10 % 1.10 % (as per insurance policy) Pay-as-you-go system 10

11 Agenda AXA Winterthur Swiss Social Security System Second Pillar Funding Design of Benefits Plan Management of Assets Taxation Trends / Overview Question? 11

12 The Swiss pension system The 2 nd Pillar / BVG Three-pillar system Pillar 1 Pillar 2 Pillar 3 State pension Ensure minimum standard of living Occupational benefits Maintain current standard of living Private Pension Provide individual supplements AHV / IV Supplementary benefits (EL) Mandatory insurance BVG/ UVG-O Extramandatory insurance UVG- Z/ KKV Tied pensions* (Pillar 3a) Flexible pensions (Pillar 3b) * with additional tax credits 12

13 Which salary and who is insured First contribution payment for disability and survivors' benefits (risk premiums) First contribution payment for retirement insurance (saving process) Age January 1 January 1 Salary components in excess of the BVG maximum are not insured under Pillars 1 and 2. CHF 83,520 Coordinated salary = BVG salary = Pensionable salary CHF 24,360 20,880 3,480* 20,880 3,480* 24,360 27,840 24,360 59,160 24,360 16,480 59, AHV salary 20,880 20,881 27,840 52,200 83, ,000 The minimum pensionable BVG salary for persons earning an income that lies between the enrollment minimum of CHF 20,880 and CHF 27,840 is always CHF 3,

14 Overview of BVG Benefits, 2 nd Pillar payable in case of sickness Age Retirement pension Child's pension 20% of retirement pension 100% Death Due to illness Surviving spouse's pension 60% of disability or retirement pension Orphans' pension 20% of disability or retirement pension Disability Due to illness Disability pension Child's pension 20% of disability pension * 100% The total of future retirement credits does not bear interest 14

15 Benefits and Cost's Retirement Pension: Total retirement credits + Interest = Retirement assets X Conversion rate = Annual retirement pension (Retirement assets con be paid out in a lump sum if the regulations include this option) 15% 18% 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% 10% 7% Men Women Level premium system Interest: (as of as per ordinance of Federal Council: 1.5%) 15

16 Overview of UVG Benefits, 2 nd Pillar payable in case of accident As a percentage of UVG salary (max. CHF 126,000) In coordination with AHV / IV and BVG up to a maximum of 90% of Pillar 2 the pensionable salary (complementary pension) Death Due to accident Widow's/widower's Orphans' pension 25% 40% Disability Due to accident Half orphans' pension Daily benefits 15% Private Pension Provide individual Disability pension supplements + allowance for physical or mental impairment Pillar 80% 80% 16

17 Overview of benefits Example for a pension gap 17

18 Agenda AXA Winterthur Swiss Social Security System Second Pillar Funding Design of Benefits Plan Management of Assets Taxation Trends / Overview Question? 18

19 Funding Vehicles Collective Foundation Semi-autonomous Solution Fully autonomous Solution with Reinsurance without Reinsurance 19

20 Funding Vehicles Collective Foundation Small & Medium-sized companies < 100 members plus reinsurance contracts Full-service ("all-in-fee") Delegation to Foundation of Investment Risk coverage Administration 20

21 Legal Relationships Joining a Collective Foundation Employer Employment contract Employee Affiliation contract Staff Pension Fund Commission Occupational benefits fund regulations Auditors Foundation Life Insurance Company (as Managing Director) Occupational Benefits benefits experts Board of Trustees Investment rules Deed of foundation Group insurance contract Asset Manager Dep. On type of occupational benefits solution Founder Life Insurer 21

22 Funding Vehicles Partially autonomous solution Medium & Large companies > 100 members Risk benefits reinsured via 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 22

23 Agenda AXA Winterthur Swiss Social Security System Second Pillar Funding Design of Benefits Plan Management of Assets Taxation Trends / Overview Question? 23

24 Principle of moduls for a plan design Insurance at full value Mixed forms Semi-autonomous Solutions Autonomous Solutions AXA Winterthur AXA Combi Invest* AXA Dual Invest** AXA Client Invest AXA Group Invest Death & Disability Death & Disability Death & Disability Death & Disability Death & Disability Death & Disability Death & Disability Conversion Rate Conversion Rate Conversion Rate Conversion Rate Conversion Rate Conversion Rate Conversion Rate Investment Process Insurance company defines investment strategy Investment Process Investment strategy chosen by Occupational Benefits Institution Investment Process Investment strategy given by foundation Investment Process Investment strategy chosen by Occupational Benefits Institution Investment Process Investment strategy given by foundation Investment Process Investment strategy given by foundation Investment Process Investment strategy given by foundation Interest Interest Interest Interest Interest Interest Interest = Full coverage of risk by life insurance company = Foundation or occupational benefits fund takes the risk = Purchase of the risk insurance through the life insurance company * Combi Invest: Insurance at full value, which gives the occupational benefits fund the possibility to invest a part of the pension capital self dependent * * Dual Invest: 50% oft he pension capital with AXA Leben AG with guaranteed interest rate, 50% invested yield oriented 24

25 How to create a Mulitnational Plan Coordination or not? Analysis of employee universum within the company How do I define the salary structure? > 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 Salary 450' '040 60'000 Additional Benefits Basic Plan 60% of employees 25

26 Sample Multinational Plan Plan Design Basic Plan Additional Benefits Pension Base Pension Design based on age Based on salary (without coordination deduction) up to 200% of BVG pensionable salary = CHF 167'040 Basic salary coordination deduction of CHF 167' % 14% % 14% % 14% (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 1 st and 2 nd Pillar max. insured benefits: should not exceed 85% of the last salary 26

27 Agenda AXA Winterthur Swiss Social Security System Second Pillar Funding Design of Benefits Plan Management of Assets Taxation Trends / Overview Question? 27

28 Investment / Occupational Benefits Management Assets Liabilities Investment concept Strategy Tactics Timing / securities Selection Occupational benefits concept Risk tolerance Advice Administration 28

29 Investment Philosophies Bank Saving Insurance Company Saving Transparent investment of savings contributions Performance guarantees obtained Real World Own responsibility Own determination of investment strategy Performance-oriented investments (no guarantee) Full delegation of investment responsibility Full delegation of investment activity Intrinsic value and minimum value guarantees Model World Liquidity planning Liquidity guarantee Individuality Solidarity 29

30 Limitation of investment categories in accordance with BVV2 Liabilities Foreign currencies Real estate 50 % mortgage deeds, mortgage bonds 30 % foreign currency without currency hedging 30 % real estate, of which max. 1/3 is held abroad 10 % per debtor, except fed. bonds and central mortgage bond institutes 5 % per property 30 % collateral on market price Shares Alternative investments 50 % shares 5 % per participation 15 % alternative investments Only group investments without reserve liability Unsecured investments held by the employer 5 % unclosed investments 5 % real estate of which the employer uses more than 50 % of its capacity for business purposes (Art. 57 BVV2) 30

31 Interest rates Legal minimum interest rate % ,25 % ,25 % ,50 % ,75 % ,00 % % Decided annually by Federal Council Interest on extra-mandatory assets can vary 31

32 Agenda AXA Winterthur Swiss Social Security System Second Pillar Funding Design of Benefits Plan Management of Assets Taxation Trends / Overview Question? 32

33 Taxation The pension foundation is not subject to tax Employee benefits solutions have the obligation to be organised through a Foundation The Foundation has its own legal entity Foundations have a separate controlling institution The Foundation is a guarantee, that the employee's capital is invested externally and separately from the Company /Employer 33

34 Fiscal treatment BVG contributions AHV IV / EO contributions No tax Taxed as income Taxed as income on a reduced basis + Taxed as capital BVG Taxed as income AHV AHV salary Retirement assets Pensions 34

35 Agenda AXA Winterthur Swiss Social Security System Second Pillar Funding Design of Benefits Plan Management of Assets Taxation Trends Question? 35

36 Trends / Slogan DERISKING Risk Pricing Longevity Choice of Plan Design Interest Rate Guarantee 36

37 Risk-Differentiated Pricing Risk Category Allocation Allocation units Economic sectors as per NOGA (SFSO 2002) Database AXA-Winterthur collective portfolio Observation period: last 6 calendar years Key parameters for risk experience Primary: Frequency of disability In borderline cases: loss ratio 37

38 Longevity Evolution of Conversion Rates 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 Pensions are calculated using the applicable actuarial conversion rates - For men aged % - For women aged % THIS IS A CONSEQUENCE OF THE DEMOGRAPHIC DEVELOPMENT 38

39 Flexible retirement a schematic example Reduction to 70% - first step (pension / lump sum) Reduction to 50% - second step (pension / lump sum) Reduction to 30% - third step (pension / lump sum) Full retirement - fourth step (pension / lump sum) Partial retirement Regular retirement age Deferred retirement 39

40 Choice of different Plan design only for savings benefits Plan 1 = Standard Plan 2 + 2% Plan 3 2% Employer Employer Employer 10% 11% 10% 11% 10% 11% 7% 8% 7% 8% 7% 8% Employee Employee Employee 4% 5% 7% 9% 6% 7% 9% 11% 2% 3% 5% 7% 40

41 Insured persons choose their investment strategy individually Revolutionary enhanced product range Flex Invest offers new perspectives The insured decide themselves The insured themselves determine the investment strategy and savings contributions Taking personal responsibility The insured no longer bear the consequences of a third party defining their investment strategy In line with the risk profile The investment reflects the insured person's risk capacity and risk appetite, as well as his or her investment horizon With its Flex Invest product, AXA again shows its pioneering spirit. As the first established occupational benefits provider in the collective foundation market, AXA now offers a solution with which insured persons no longer need to delegate control but can manage a future oriented and autonomous investment themselves. The offer ranges from "fully secure" to "clearly income oriented" and is unique in the market. Flex Invest 41

42 Change to a new investment concept Current pension concept New pension concept Pensionable salary of CHF 125,280 to 835,200 More than 1.5 x BVG salary New occupational benefits fund (not registered) Salary can be insured with Flex Invest Pensionable salary of CHF 83,520 to 125,280 Up to 1.5 x BVG salary Potential splitting or restructuring of the pension concept Up to 1.5 x BVG salary Pensionable salary up to CHF 83,520 BVG salary BVG salary Flex Invest 42

43 Summary of Benefits Institution Insured Persons Benefits Finance AHV / AVS 1st Pillar Compulsory insured : In Switzerland resident and employed people Disability, Death and Old age Benefits. State pension which covers the basics Total 9.8% 50% Employer /Employees Addition 1st Pillar AHV/AVS entitled persons For Old age entitled persons with min. Benefits only Cities, Shires/States, Country BVG 2nd Pillar Accident Insurance UVG Medical Insurance Compulsory insured: AHV/AVS Persons with a min. Salary Compulsory insured: employed Persons admitted to AHV / BVG Compulsory insured: all persons living in Switzerland in case of illness or accident (except UVG submitted) Disability, Death and Old age Benefits Together with 1 st Pillar is intend to maintain the same standard of living Disability and Death Benefits (long life) Complementary to the 1 st Pillar. Max. Benefits 90% of insured Salary (max. CHF 126'000) Basic benefits equal for all. High Benefits standard. (Including Hospital, Doctors, Medicine) Unemployment All AHV/AVS admitted persons Married: 80% of a salary max. CHF 126'000.- /520 days Unmarried: 70% of a salary max. CHF 126'000.- /520 days Plan design related. 50% min Employer Occupational premium Employer/Employee -Francise - Shire/State -100% private 2% ins. Salary (126'000) 50% each Military Insurance All in military service and civil defence Includes also medical care costs together with 1 st Pillar 90% of last insured salary Country Salary deficiency (EO) and maternity ** Women who are employed at least 5 months 80% insured salary at max. CHF a day for 14 weeks 0.3% Salary 50% each **compensation 43

44 Agenda AXA Winterthur Swiss Social Security System Second Pillar Funding Design of Benefits Plan Management of Assets Taxation Trends / Overview Question? 44

45 Thank you for your attention! AXA Winterthur Yvonne Eggmann Sen. Employee Benefits Consultant T M yvonne.eggmann@axawinterthur.ch