Pension Funds Novartis Information for Novartis Associates in Switzerland Philipp P. Suter, Consultant Nyon, 26.09.2013
Agenda Swiss 3 Pillars Principle Pension Funds Novartis Things worth knowing 2 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
The Swiss 3 Pillars Principle Pillar 1 AHV/IV State pension Pillar 2 BVG Company pension Pillar 3 Personal Savings Private pension 3 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Old-Age and Survivors Insurance Alters- und Hinterlassenen-Versicherung AHV, Invalidenversicherung IV Pillar 1 AHV/IV 1948/1960 State pension Subsistence minimum Old age / disability pension max.: CHF 28,080. per year Survivors pension max.: CHF 22,464. per year Contributory scheme 4 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Company Pension Berufliche Vorsorge BVG (Pension Fund) AHV/IV + BVG = maintenance of living standards Proportion of salary from CHF 21 060. (max. AHV) to max. CHF 84 240. Pillar 2 BVG 1985 Company Level-premium system Insured benefits: retirement, death, disability 5 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Entry threshold and coordination sum Valid from 01.01.2013 Max. simple AHV pension CHF 28 080. Coordination sum deducted CHF 24 570. 7/8 of max. simple AHV pension Entry threshold CHF 21 060. 3/4 of max. simple AHV pension Max. insurable remuneration CHF 84 240. 3x max. simple AHV pension Max. deduction pillar 3a CHF 6 739. 8% of max. insurable remuneration 6 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Personal Savings 3a In addition to Pillars 1 + 2: financing of chosen needs Voluntary providence Tax-deductible (max. CHF 6,739. for employees) Pillar 3 Voluntary Savings Private 7 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Pension Funds Novartis 8 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Pension Fund Novartis 1 Is one of the largest autonomous Pension Funds in Switzerland with almost 32 000 insured members and retirees with assets worth 12,3 billion Swiss Francs with a coverage ratio of 113,6% is a defined contributions scheme which came into force on January 1 st, 2011 The Board of Trustees is made up equally (7 employer and 7 employee representatives) 9 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Pension Funds Novartis 2 was established in January 2011 is one of the most modern Pension Funds in Switzerland insures salary parts over CHF 150 000 (base salary plus incentives) is a defined contributions scheme offers great flexibility for members between three contribution scales and also a choice of 5 different investment straegies 10 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Management Pension Fund Novartis Headed by Marcel Schmidt Admission at a salary above of CHF 220 000. Important: Copy of employment contract to Marcel Schmidt Admission at «Corporate Executive» functional level Incentive insured in Management Pension Fund as part of income (not in Pension Funds 1 and 2) 11 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Risk CHF 0 220 000 Savings CHF 0 150 000 CHF 150 220 000 Structure of Novartis defined contributions plan Novartis Pension Fund 2 (PF 2) Contributions of employer and members in ratio 2 : 1 Savings process in defined contributions plan (interest according to investment performance) Retirement benefits: lump sum Risk benefits (death/disability): accrued capital, at least 400% of insured salary Individual choice of investment strategy Novartis Pension Fund 1 (PF 1) Standard contributions of employer and insured members in ratio 2 : 1 Savings process in defined contributions plan (minimum interest 0%) Retirement benefits: pension with sustainable conversion ratio / higher lump sum option (maximum 50% compared with 25% in old plan) Risk benefits (death/disability) in the form of a pension Additional savings plan from age 40 Examples Monika Meier earns CHF 140 000 and received a bonus of 15%, so her total earnings are CHF 161 000. She is covered in Pension Fund 1 for the maximum (i.e. CHF 150 000 less coordination offset) and in Pension Fund 2 for CHF 11 000. Hans Huber earns CHF 70 000 and received a bonus of 10% during the year. He is covered only under Pension Fund 1. 12 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Overview of insured salaries Pension Funds 1 and 2 Base salary + Incentive/bonus = Annual Salary + Shift allowance Risk plan Retirement plan PF1 Savings plan PF1 Retirement plan PF2 Base salary (max. CHF 220 000) Base salary Base salary Base salary - coordination offset (CHF 24 570) = Insured salary (max. CHF 195 430) + Incentive/bonus + Incentive/bonus + Incentive/bonus + Shift allowance + Shift allowance + Shift allowance = Annual salary (max. CHF 150 000) - coordination offset (CHF 24 570) = Insured salary (max. CHF 125 430) = Annual salary (without upper limit) - coordination offset (CHF 24 570) = Insured salary = Annual salary (without upper limit) - coordination offset (CHF 150 000) = Insured salary 13 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Overview of insured salaries Pension Funds 1 and 2 (for assiociates insured in the Management PF) Base salary (< 220 000) Base salary (> 200 000) Incentive/bonus = Covered by Management Pension Fund Risk plan Retirement plan PF1 Savings plan PF1 Retirement plan PF2 Base salary (max. CHF 220 000) Base salary (max. CHF 150 000) Base salary (max. CHF 150 000) Base salary (max. CHF 150 000) - coordination offset (CHF 24 570) = - coordination offset (CHF 24 570) = - coordination offset (CHF 24 570) = - coordination offset (CHF 150 000) = Insured salary (max. CHF 195 430) Insured salary (max. CHF 125 430) Insured salary (max. CHF 195 430) Insured salary (max. CHF 70 000) 14 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Retirement credits 3 different scales to chose from Age Retirement credits «Standard» (in % of insured salary) «Standard plus» «Standard minus» Member Novartis Total Member Member 25 29 3,50 7,00 10,50 5,50 1,50 30 34 4,00 8,00 12,00 6,00 2,00 35 39 4,50 9,00 13,50 6,50 2,50 40 44 5,00 10,00 15,00 7,00 3,00 45 49 6,25 12,50 18,75 8,25 4,25 50 54 6,75 13,50 20,25 8,75 4,75 55 59 7,25 14,50 21,75 9,25 5,25 60 65 7,75 15,50 23,25 9,75 5,75 15 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Contribution scales Influence on retirement benefits Standard plus Standard Standard minus 0 200'000 400'000 600'000 Retirement credits Interest credits The chart shows an example on how changing the contribution rates can affect the level of retirement benefits at age 65. 16 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Savings credits Pre-financing a bridging-pension until regular retirement age Age Savings credits (in % of insured salary) Member Novartis Total 40 65 1,75 1,75 3,50 A further credit of 3,50% applies to all members ages 40 and over. This is paid into an additional savings plan within Pension Fund 1. Half of this amount is is contributed by Novartis and haly by members. 17 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Risk contributions Financing risk benefits Age Pension Fund 1: risk contributions (in % of insured salary) Member Novartis Total until 25 0,50 1,00 1,50 25 65 1,40 2,80 4,20 Age Pension Fund 2: risk contributions (in % of insured salary) Member Novartis Total until 25 0,40 0,80 1,20 25 65 0,40 0,80 1,20 18 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Rates of interest in Pension Fund 1 2011 2012 2013 Provisional interest rate current year 2,50% 1,00% 1,50% Projection interest rate 2,75% 2,75% 2,75% Final interest rate past year 2,50% 3,00% tbd 12/2013 19 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Performance in Pension Fund 1 15 13.1 10.8 10 5 5.4 8.2 2.8 6.2 3.1 2.1 9.9 3.6 1.6 7.3 6.4 0 2.6 2.0-0.7 1.7 0.0-5 -6.6-10 -8.0-15 -20 Performance in % Benchmark in % 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Investment allocation Pension Fund 2 5 strategies to chose from Money Market Bonds Equity 25 Equity 40 Money Market JP Morgan MM CHF Bonds CHF SBI Bonds World Hedged CHF Barclays Global Aggregate CHF Equity World MSCI All Countries ex CH Equity Switzerland SPI 100% 50% 50% 30% 50% 25% 30% 20% 30% 5% 10% Default strategy 21 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Investment allocation Pension Fund 2 LifeCycle (since 2013) 25 65 22 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Performance overview Pension Fund 2 2011 2012 Performance overall 3,13% 5,32% Money Market 0,05% -0,08% Bonds 4,43% 4,62% Equity 25 1,32% 6,99% Equity 40-0,89% 8,67% 23 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Investment allocation Pension Fund 2 Practical approach The pension fund is investing the savings contributions for the insured member according to the investment strategy chosen by this person. The investment is made by purchasing shares in the investment vehicles of the chosen strategy rather like shares in a fund credited to a fund account. The insured person is entitled to benefits from the pension fund to the value of the fund account, but not less than the minimum vested benefits defined by law By means of secure access to information on the platform of the provider, the insured person can see the value of his /her account at any time. The value of the fund account on the last day of the month is imported into the technical administration system of the pension fund via interface. The effective settlement at the time of leaving is initiated by the pension fund, whereupon the legally required comparative calculations are at the responsibility of the pension fund, too. 24 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Enhanced Flexibility Overview One of the key features of the new plans are their flexibility. There are a number of ways in which you can influence the value and form of the benefits payable from the new plan. Regular contributions: You have a choice of three different levels of retirement age credits. You can switz between these levels on a monthly basis. Additional voluntary contributions: You may decide to contribute additional voluntary purchase payments, provided you re not already at the maximum level allowed by the plan. Investment strategy: If your insured salary is partly covered in Pension Fund 2, then for your Pension Fund 2 retirement account you can choose your investment option. 25 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Enhanced Flexibility Overview (2) Form of benefit at retirement: In Pension Fund 1 you are able to choose, within limits, to take a portion of your retirement account as a lifelong pension and a portion as a lump sum (up to 50%). Level of benefits for dependents: At retirement, you can choose between different levels of pension to be paid by Pension Fund 1 to your spouse (partner) after your death. Early retirement: You can decide to retire before the plan s normal retirement age of 65, with the earliest age being 60. If you retire before your Social Security benefits (AHV) start to be paid then you can choose to have part of your savings account paid as an extra temporary bridging pension for this period. 26 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Overview of benefits Pension Fund 1 Age Death Disability Lifelong retirement pension Conversion rate at age: - 65: 6.10% (5.42%*) - 64: 5.95% (5.30%*) - 63: 5.80% (5.18%*) - 62: 5.65% (5.06%*) - 61: 5.50% (4.94%*) - 60: 5.35% (4.82%*) of the existing retirement assets (*) Conversion rate for a survivor s pension Lump-sum pay-out instead of pension up to max. 50% possible (time limit 3 months before retirement) Retirement child pension 20% of pension up to age 20/25 Available savings plan assets can be used to finance a bridging pension until to statutory (AHV) retirement age (temporary retirement pension) or be paid out as a one-off retirement lump sum. Spouse s or domestic partner s pension for active insured members: 60% of insured/current disability pension Retirement pension recipient: 60% of retirement pension, or with the survivor s pension option 100% of retirement pension Orphan s pension 20% of insured or current disability or retirement pension up to age 20/25 Lump sum on death Active insured members: 200% of insured disability pension plus accrued savings plan assets plus assets transferred from incentive/bonus and shift insurance on 1.1.2011 plus voluntary extra contributions since 1.1.2011 paid into retirement and savings account minus early withdrawals WEF/ divorce pay-outs minus retirement/ disability benefits already paid put Disability pension 60% of insured salary Risk up to age 65 From age 65 onwards: conversion of continued retirement assets with current conversion rate (at present 6.10%) Disability child pension 20% of disability pension received up to age 20/25 Disability lump sum (with 100% disability) Accrued savings plan assets 27 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Retirement pension Widow(er) s pension Retirement pension Widow(er) s pension Lifelong survivor s pension for partner 100% 60% reduced conversion ratio Standard solution Alternative option 28 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Widow(er) s pension In the case of re-marriage before the age of 60, entitlement to the widow(er) s pension ceases. A lump sum settlement amounting to three annual widow(er) s pensions. The entitlements of the divorced spouse are the same as those of a surviving spouse, provided the marriage has lasted at least 10 years and a pension or capital settlement for a lifelong pension has been awarded in the divorce decree. 29 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Lifetime partner pension Insured benefits Lifetime partner pension as well as the widow(er) s pension is 60% of the retirement pension PF1. Lump sum on death up to age 65, provided the order of beneficiaries has been adjusted in favour of the lifetime partner (PF1 and PF2). 30 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Lifetime partner pension Conditions Written support agreement, signed by both parties and sent to the Novartis Pension Fund during the lifetime of the partner and before the occurrence of the insurance event. Lump-sum on death (for retirees and active insured members up to age 65): change in the order of beneficiaries during the lifetime of the insured person to be submitted to the Pension Fund 1 resp. 2 in writing. Partnership had existed for at least 5 years without interruption before death and the surviving partner was substantially supported by the deceased or Partner has to support one or more children from this relationship. 31 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Overview of benefits Pension Fund 2 Age Death Disability Lump sum on retirement Assets available at the time of retirement Lum sum on death Assets available at the time of death, at least 400% of insured salary Lump sum on disability Assets available at the time when the disability pension starts, at least 400% of insured salary. 32 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Things worth knowing 33 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Restrictions on voluntary extra contributions Benefits resulting from voluntary extra contributions cannot be taken in the form of a lump sum within the ensuing three years Early withdrawal: Voluntary extra contributions can only be paid when early withdrawal (home ownership) has been completely repaid When moving to Switzerland from abroad: The sum of voluntary contributions must not exceed the equivalent of 20% of the insured salary during a période suspecte of 5 years 34 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
About the portable sum Admission Admission without health restrictions! Obligation of the insured person to pay in all portable pension assets When entering or buying into the pension funds, the attention of the insured person should be drawn to this fact. 35 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
About the portable sum Leaving The portable sum is transferred to the pension fund of the new employer. If there is no new pension fund or none is known, the portable sum may be transferred to a Vested benefits account (Freizügigkeitskonto) or Vested benefits policy In the absence of notification by the insured person, the portable sum is transferred to the Foundation of the BVG auxiliary Institution. 36 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
About the portable sum Leaving the company and cash settlement The portable sum (vested benefits) can be taken in cash if the insured person is taking up self-employment in Switzerland, or is leaving Switzerland permanently and is moving to EU country: only the non-compulsory retirement savings can be paid out. The BVG savings have to remain in Switzerland (in a vested benefits account or a vested benefits policy). is moving to a non-eu country: the total retirement savings (BVG and noncompulsory) can be taken in cash. Insured members who are married or living in a registered partnership must obtain the officially authenticated signature of the spouse/partner. 37 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Taxation at source On capital payments for all persons with a place of residence outside Switzerland. for countries where a double taxation agreement exists, the tax at source can be reclaimed. On pension payments only for countries without double taxation agreement with Switzerland. 38 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Insurance Services Novartis We offer an independent consultancy service for insurance matters at no charge. All associates and their family members benefit from favourable conditions for their insurance solutions. You can reach us: Through e-mail: novartis.versicherungsberatung@novartis.com E-mail individual: firstname.surname@novartis.com By phone: 061 324 97 97 For further information, please consult: http://www.versicherungsberatung-novartis.ch
Scope of advisory services The consultation encompasses the following areas: Insurance: Collective agreement partner: Health Insurance Private Liability Household content Motor vehicle Insurance Risk Life Insurance
Website www.pensionskassen-novartis.ch 41 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only
Contact Pension Funds Novartis For further pension advice, please don t hesitate to contact the Pension Funds Novartis team. Internet E-Mail www.pensionskassen-novartis.ch pk.novartis@novartis.com Hotline +41 61 324 24 20 As always, we re happy to help! 42 Pension Funds Novartis Philipp P. Suter 26.09.2013 Pension Funds for Associates, Nyon Business Use Only