New 1e pension legislation released – removal of minimum guarantee confirmed and rules around investment strategies clarified

The Swiss Federal Council has released the long-awaiting final wording of the new law that will govern 1e pension plans. 1e pension plans allow employees to choose their own investment strategy from a range of options. The plan can apply on earnings above CHF126’900 (4.5 times the maximum single AHV/AVS pension).

The new legislation applies from 1 October 2017. The main change is largely as expected – the Vested Benefit Act has been changed to exclude the need for a minimum guarantee at leaving. This change should mean that companies can account for these plans as defined contribution plans under IFRS/US GAAP, meaning no balance sheet liability, provided the plan meets the conditions for this.

The main changes in the ordinance

  • Plans can offer up to maximum 10 different investment strategies that apply to all of an employee’s savings. The limit is applied to a pension arrangement (“Vorsorgewerk”) rather than a provider.
  • At least one “low risk” investment strategy has to be offered. Low risk is broadly defined as cash and debt investments in Swiss francs with good credit-worthiness and an average duration below 5 years.
  • Remove the minimal benefit requirement of articles 15 and 17 of the Vested Benefit Act. For existing plans this requirement is removed once the plan offers a low risk strategy.
  • The definition of maximum savings in a 1e plan has been clarified.
  • Transition rules apply: if you already have a plan this has to comply with the new rules, in particular the new investment strategy offering by the end of 2019.

What now?

If you already have a 1e plan: you’ll need to review and possibly update the plan to meet the new rules. To be able to remove the minimal guarantee, the main barrier to defined contribution accounting under IFRS/US GAAP, one of the strategies you offer needs to meet the “low risk” definition. The plan design may need to be reviewed to ensure it complies with the maximum savings limits. Your plan will need to fully comply with the new rules by the end of 2019.

If you don’t yet have a 1e plan: the legislation is now clear and applies from 1 October 2017. So if your provider is ready, any project to implement a 1e plan should now have a clear path forward. How complex this will be depends on your own situation. Companies with corporate pension funds may find implementing a 1e plan with a separate provider more challenging due to the impact this has on their current fund. Given the timing, need for communication to employees and contractual implications, implementing a 1e plan by 1 January 2018 may be too soon. But starting as early as possible should mean you are on course for 2018.

More details

You can find more details on 1e plans through the following article. The full ordinance can be found here.

Switzerland signs declarations on introduction of AEOI with 5 countries

It was announced by the Swiss government on 20 January 2016 that Switzerland has signed joint declarations on the introduction of the automatic exchange of information (AEOI) in tax matters on a reciprocal basis with Jersey, Guernsey, the Isle of Man, Iceland and Norway. Switzerland and these countries intend to start to exchange data in 2018, after the necessary legal basis has been created in the various countries.

The joint declarations signed by Switzerland and these countries meet the criteria set by the Federal Council in the negotiation mandates of 8 October 2014. Aside from the EU and the United States, the negotiations initially concern countries with which there are close economic ties and which provide their taxpayers with sufficient scope for regularisation. Switzerland has already signed a joint declaration of this nature with Australia and an agreement on the introduction of the AEOI has already been concluded with the EU.

It is notable that the Swiss government’s announcement of these agreements also states that

  • These five countries have prepared scope for regularisation for their taxpayers, and that
  • Iceland and Norway have reiterated their intention to start talks on market access for Swiss financial service providers.

The Federal Council authorised the Federal Department of Finance (FDF) to initiate a consultation on introducing the AEOI with the other countries following the signing of the declarations with the various countries. Thereafter, the corresponding federal decrees will be submitted to Parliament for approval.

Please see the link below for more details.

https://www.news.admin.ch/message/index.html?lang=en&msg-id=60367

We will keep you updated on relevant AEOI developments as they occur.

The changing role of the CFO: How energy transformation is shifting the CFO focus

Our new Thought Leadership report

The new report, which forms part of a series of PwC publications on energy transformation, looks at how the power sector CFO role is evolving, the challenges it needs to address and the capabilities that will be crucial for delivering first-class performance.

It looks at eight specific challenges arising out of energy transformation:

1. Anticipating and leveraging the impact of new technologies
2. Reassessing and restructuring the asset portfolio to optimise value
3. Designing new ventures and commercial arrangements
4. Achieving full recovery of prior investments
5. Influencing policymakers and regulators
6. Replacing declining revenues from traditional businesses
7. Measuring enterprise performance as business models shift
8. Attracting capital through appropriate risk allocation

Which are your challenges and how does this effects your company? Please get in touch with me for any further discussion.

Download the full report here.

Be ready: the new global P&U Thought Leadership report is coming…

We are pleased to announce the global launch of our new Thought Leadership report:

“The changing role of the CFO
How energy transformation is shifting the CFO focus”

The changing role of the CFO: how energy transformation is shifting the CFO focus shows how CFOs in the power sector are shifting from stewardship to  strategy, value realisation and optimisation. The new report, which forms part of a series of PwC publications on energy transformation, looks  at how the power sector CFO role is evolving, the challenges it needs to address and the capabilities that will be crucial for delivering first-class performance.

The report emphasises that the historical CFO capabilities related to management reporting, performance management and investor relationships will continue, but they will become more akin to minimum requirements. Alongside them, CFOs need to be better at communicating where strategy is taking the company and the link between strategy and value realisation.

Be ready for the launch on 24 November 2015!