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Amendments to ordinances relating to occupational pension plans

360°Benefits I News

By Angelica Meuli and Jérôme Franconville | October 1, 2020

Legal changes, adjustments and their effects on occupational benefits with effect from 1 October 2020

On 26 August 2020, reflecting financial and actuarial developments, the Federal Council made a number of amendments to the following ordinances:

  • Ordinance on Vested Benefits in Occupational Retirement, Survivors' and Disability Pension Plans (OLP)
  • Ordinance on Tax Deductions for Contributions to Recognised Forms of Pension Provision (BVV3/OPP3)
  • Ordinance on Occupational Retirement, Survivors' and Invalidity Pension Plans (OPP2)
  • Ordinance on Investment Foundations (OFP)

The amendments will come into force on 1 October 2020, with the exception of the change in the technical interest rate applicable, in the event of divorce, to the portion of the annuity to be converted into a life annuity. This will come into force on 1 January 2021.


Main adjustments affecting pension funds

  • Technical interest rate (Art. 8 OLP): Downward revision of the range within which the technical interest rate used in the calculation of entry and exit benefits from a defined benefit plan may be set to 1% to 3.5% (previously 2.5% to 4.5%). This range covers almost all technical rates used by pension funds.
  • Transitional provision OLP: For the conversion of the pension into a life-long annuity according to Article 19h OLP, the technical interest rate will be 2% until 31 December 2020
  • Art. 1h para. 1, first sentence BVV2: In order to determine whether the insurance principle is sufficiently respected, it will now be necessary to check whether the 4% share of contributions allocated to risk is reached globally for an employer's entire employee benefit plan, and not for each plan (reduction from 6% to 4%). The previous limit of 6%, which corresponded to 60% of the share of the theoretical average premium, must be reduced, as it would force pension funds to artificially allocate too much money to risk coverage and keep risk premiums too high.
  • Infrastructure investments (Art. 53 para. 1 let. dbis, let. e and para. 2, second sentence and Art. 55 let. f BVV2)
    Infrastructure investments are now included in a specific asset class within the BVV2 (previously they were included in "alternative investments") and can account for a maximum share of 10% of total assets. The share in the alternative class remains limited to 15%.

Additional changes

  • Capital commitments (Art. 19, first sentence FOP)
    The possibility of capital commitments is also intended for infrastructure investment groups.
  • Investment subsidiaries (Art. 32 para. 2 let. FOPO)
    In the case of infrastructure investment groups, subsidiaries require a permit.
  • Publications and prospectuses (Art. 37 para. 2 FOP)
    The publication of a prospectus is required for new infrastructure investments.
  • Reduction of benefits if the beneficiary intentionally caused the death of the pension fund member (Art. 15a OLP and Art. 2a BVV3)
    New optional provisions allowing vested benefit institutions and institutions for individual linked (3a) pension provision to reduce or refuse benefits in the event of death caused by homicide, if a regulatory basis is provided for such purpose. These new provisions reflect social insurance practice that the pension institutions also apply in the context of their coordination provisions.
  • Transfer of pension capital to a pension institution or other recognised forms of pension provision (Art. 3a BVV3)
    This amendment explicitly enshrines the current practice in the Ordinance. Tax practice allows a partial transfer from pillar 3a as long as it fully closes the gap in pillar 2. Conversely, a partial filling of the gap in the 2nd pillar by means of a partial transfer from pillar 3a is not permitted.

Infrastructure investments (Art. 53 and 55 OPP2)

These amendments implement the Weibel motion ("Making infrastructure investments more attractive to pension funds") adopted by Parliament on 15 March 2018. Prior to this amendment to the Ordinance, infrastructure investments were considered to be alternative investments.

However, it should be noted that leveraged infrastructure investments, at fund level, continue to be considered as alternative investments. Therefore, only investments that do not use debt (at fund level) can be included in the new category of infrastructure investments.

Our view

We believe that infrastructure investments are an attractive asset class for pension funds. They offer a number of advantages.


  • It is one of the largest asset classes after equities, bonds and real estate;
  • Infrastructure investments generate high running yields compared to other asset classes;
  • They offer returns with some indexation to inflation.
  • In addition, infrastructure, particularly unlisted infrastructure, has shown low or negative correlations to equities, bonds and other asset classes over time;
  • Finally, such investments can have a significant impact on a country's energy and social efficiency (high ESG impact).

In order for a pension fund institution to make an informed assessment of whether it wishes to accept the risks inherent in this type of investment (complexity, illiquidity, political and regulatory risks), it must weigh these risks against the above-mentioned advantages, taking into account the fact that illiquidity can be managed by choosing a combination of unlisted and listed investments.

What actions need to be taken?

  • Check whether an update of the pension fund's investment regulations is necessary.
  • For pension funds already invested in infrastructure investments, check whether they use leverage to assess the portion of the investments that can be considered as "infrastructure investments" and the portion that must be maintained in the "alternative investments" asset class.
  • If the pension fund is not invested in infrastructure investments, the need for a training session for the members of the Board of Trustees and/or Investment Committee on this subject should be assessed, since these investments can now potentially be classed as traditional investments.
  • Include the evaluation of this asset class in the next ALM study, or possibly consider this step in the context of a smaller-scale or "asset-only" ALM study.

Associate Director, lic. iur.

Head Investment Services (Schweiz)

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