Legal framework for the second pillar in Switzerland
Introduction to the three-pillar system
The Swiss pension system is based on three complementary pillars designed to ensure financial security for individuals in retirement.
The first pillar, or state pension scheme, is financed by employee contributions and is designed to cover basic needs.
The second pillar, or occupational pension provision, supplements the first pillar by maintaining the previous standard of living.
Finally, the third pillar is optional and consists of individual savings.
Together, these three pillars offer robust financial security, integrating state, occupational and personal contributions.
The second pillar, in particular, is designed to ensure that, combined with the first pillar, a retiree can maintain a certain percentage of his or her final salary.
This compulsory system for salaried employees also covers the risks of disability and death.
In short, the three-pillar system offers balanced financial protection, dividing responsibilities between the state, the employer and the individual.
How second-pillar contributions work
The second pillar operates on a funded basis, where contributions paid by both employer and employee are invested to generate returns.
Contributions are compulsory for employees whose annual income exceeds a certain threshold.
They are calculated as a percentage of the insured salary, increasing progressively with the employee’s age.
These contributions are then managed by pension funds, which invest the funds to ensure optimum growth.
Employers are generally required to contribute at least as much as their employees, making the second pillar a shared responsibility.
The funds accumulated by each employee are then used to provide retirement, disability or survivor benefits, as required.
This system ensures financial continuity for employees, even in the event of professional or personal changes.
Occupational benefits regulations
Occupational pension provision in Switzerland is governed by the Federal Law on Occupational Retirement, Survivors’ and Disability Pension Plans (BVG) and the Federal Law on Vesting in Pension Plans (FZG).
The BVG sets minimum standards for the benefits, financing and organization of pension funds.
It defines membership criteria, conversion rates and minimum pension amounts.
The LFLP guarantees the portability of pension assets when changing jobs, ensuring that accumulated contributions are transferred seamlessly between different pension funds.
These laws ensure transparency and legal certainty, protecting employees’ rights and guaranteeing the prudent management of pension funds.
In addition, certain articles of the Swiss Civil Code govern certain aspects of the division of the second pillar upon divorce.
Overview of the division of pension assets in the event of divorce
In the event of divorce, the division of pension assets accumulated during the marriage is governed by specific principles.
The law states that assets accumulated during the marriage must, in a number of cases, be shared equally between the spouses.
The purpose of this 50-50 split is to ensure that both parties receive a fair share of the pension funds, regardless of who made the contributions.
This principle of sharing applies to both mandatory and extra-mandatory occupational pension assets.
However, the sharing of pension assets should not be confused with post-divorce maintenance, which is a separate obligation designed to ensure ongoing financial support for a needy ex-spouse.
The division of pension assets is a legally regulated process, often requiring judicial intervention to ensure a fair distribution in accordance with the law.
In short, Swiss law ensures that divorce does not result in disproportionate financial inequality between ex-spouses, by protecting the rights of each to a fair pension.
The legal principle of sharing by half
Purpose of half and half
Dividing pension assets in half in the event of divorce is intended to compensate for differences in income accumulated during the marriage.
This principle ensures fairness between spouses, particularly when one spouse has sacrificed part of his or her career to care for the family, or has had a lower income during the marriage.
By dividing accumulated pension assets, the law seeks to prevent post-divorce financial imbalances, thus ensuring that each spouse has sufficient resources for retirement.
The main objective is to maintain a certain standard of living for both parties after the divorce.the division of the 2nd pillar in the event of divorce is compulsory and must be decided by the judge independently of the liquidation of the matrimonial property regime.
The relevant provisions of the Swiss Civil Code are designed to ensure that each spouse benefits from the pension accumulated during the marriage.
Sharing arrangements
Pension assets are divided on the basis of contributions accumulated during the marriage, i.e. from the date of marriage to the date of filing for divorce.
Calculating the division involves identifying and valuing the assets accumulated by each spouse in their occupational benefits accounts.
The amounts thus determined are then divided in half, with each spouse receiving an equal share of the pension assets accumulated during the marriage.
The length of the marriage has a significant impact on the amounts shared.
The longer the marriage, the greater the amount of assets to be shared.
The spouses may decide to waive the 50/50 split of the pension assets, or to provide for a different distribution key (greater or less than half).
However, in the event of a waiver, the spouses must ensure that adequate provision for retirement and disability remains in place for the spouse who would have been a creditor under the 50/50 split.
Legal process
The process of division by half is governed by strict legal procedures.
When a divorce petition is filed, the court requires pension statements from both spouses.
These documents make it possible to determine the assets accumulated during the marriage.
The court then calculates the amounts to be divided and issues a division order, which is forwarded to the pension funds concerned.
These institutions then transfer the funds in accordance with the court’s instructions.
Compliance with legal procedures helps avoid disputes and ensures a fair distribution of pension assets.
The judge may also award less than half of the termination benefit to the creditor spouse, or even none at all for good reason.
Special cases: EPL buyback and payment
The calculation of assets to be divided can be complicated by the fact that a spouse has to pay into his or her occupational pension scheme or to the home ownership scheme (EPL).
Purchases made by a spouse during the marriage increase the value of his or her pension account and must be included in the calculation of the assets to be divided.
Similarly, amounts withdrawn in the form of EPLs for the purchase of a home must be taken into account, as they reduce the balance of available pension assets.
Similarly, if funds have been withdrawn for the purchase of a joint property, these amounts must be added back into the calculation to ensure an equitable division.
Thus, buy-ins and EPL payments must be carefully assessed to ensure that the division accurately reflects the contributions and withdrawals made during the marriage.
Legal and contractual limits on the division by half
Conditions for derogating from 50/50 sharing
Under certain specific conditions, it is possible to derogate from the principle of 50/50 division of pension assets.
The spouses may agree not to split their assets in half, or to waive the 50/50 split by providing for a different distribution key.
This waiver must be formalized in a written agreement and validated by the judge.
The spouses must demonstrate that the waiver does not compromise the financial security of either spouse.
For example, a short-term marriage or specific financial circumstances may justify a derogation.
The judge may also make exceptions to the 50/50 split for reasons of equity.
If a marriage has been of short duration, or if one of the spouses has significantly greater financial resources, the judge may adjust the division of pension assets.
These rulings are designed to avoid situations where the division by half would be unfair.
Rules limiting exemptions
Derogations from the principle of division by half are strictly regulated by law, to avoid abuse and ensure fairness.
Article 123 of the Swiss Civil Code stipulates that any derogation must be approved by the judge.
The judge verifies that the conditions for derogation are met, and that the agreement between the spouses is fair and does not prejudice the interests of either spouse.
The law stipulates that the spouses must justify that the exemption from division by half ensures adequate provision for old age and disability for the economically weaker spouse.
Justified reasons must be provided for the judge to accept an exemption.
For example, the law allows the judge to allocate a smaller or zero share of the pension assets to one of the spouses if exceptional circumstances justify it.
Such circumstances may include a significant difference in age or income, or specific health-related needs.
The judge may also adjust the pension shares in favor of a spouse caring for children after the divorce.
Retirement or disability situations
If one of the spouses is retired or receiving a disability pension, the 50/50 split of pension assets no longer applies.
Pension assets have already been converted into annuities, which cannot be divided in the same way as accumulated capital.
The law provides for alternative mechanisms to compensate for this situation, for example, by means of a compensatory benefit or a lump-sum payment to balance the pension entitlements of both spouses.
These measures are designed to ensure that the non-retired or non-disabled spouse enjoys adequate financial security.
The judge may decide not to proceed with a 50/50 split if this would seriously compromise the financial situation of the spouse receiving the pension.
Specific arrangements can be put in place to ensure financial equity while protecting the rights of the disabled spouse.
Practical examples
When it comes to divorce, several factors dictate the fair distribution of pension assets accumulated during the marriage.
The length of the union is decisive: long marriages often require an equitable division, while short unions may mean that each spouse already benefits from adequate pension provision.
The age of the spouses and their ability to contribute until retirement are also taken into account.
For example, if one of the spouses is considerably younger and can still save, sharing can be avoided.
In addition, each spouse’s income and assets, as well as other factors such as abuse of rights or just cause, can influence the decision.
Ultimately, each case is assessed individually to ensure a fair and balanced division, as illustrated by various examples: education funding, disproportionate benefits, domestic violence, and other specific situations that require particular attention when dividing pension assets.
Procedure, execution of partition and consequences
Obtaining the necessary documents
The first crucial step in the process of dividing pension assets is to obtain the required documents from the pension fund.
This often involves filling in specific forms and providing detailed information about the marriage, the separation and the assets accumulated during this period.
Deadlines and procedures vary according to the regulations of each institution, but it is essential to follow the instructions provided scrupulously to avoid any delays or complications in the division process.
It should also be noted that in some cases, financial experts may be consulted to independently assess the value of the pension assets, which may be necessary to ensure a fair division.
Information obligations
The parties involved in the division of pension assets have reciprocal obligations to provide information.
This means that they must provide complete and accurate information on their pension assets, as well as on any other elements relevant to the fair division of assets.
In the event of concealment or withholding of information, the court can intervene to require disclosure of these elements, thus guaranteeing transparency and fairness in the division process.
In addition, it is recommended that the parties involved in the division of pension assets familiarize themselves with the legal provisions and rights conferred on them, which can help them to navigate the process effectively and protect their interests.
Possibilities of obtaining information on spouse’s assets
In addition to information provided voluntarily by the parties, there are several legal means of obtaining information about the spouse’s pension assets.
These may include formal requests to the pension fund, court applications or mediation mechanisms to facilitate the exchange of information.
Whatever the method used, the aim is to ensure that each party has a complete and accurate picture of the pension assets at stake, thus promoting a fair and equitable division.
In some cases, it may also be necessary to call in legal experts to advise on the best strategy for obtaining the necessary information while protecting the rights and interests of the plaintiff.
Practical consequences of sharing
Once the procedure for dividing the pension assets has been completed, a number of practical consequences may arise.
These include the option of instalment payments in lieu of an annuity, which enable the parties to receive their share of the pension assets in instalments over time.
These payments can be particularly useful for ensuring continued financial security after divorce.
In addition, the division of pension assets can have significant tax and inheritance implications, which need to be taken into account in long-term financial planning.
It is therefore recommended that the parties involved consult experts in financial and tax law to assess these implications and make informed decisions.
