I’m an entrepreneur. Is it worth taking out management insurance for me and our management team?

Many businesses underestimate the importance of management insurance. However, it is a major advantage particularly in the competition for experts. A good 2nd pillar pension solution is attractive for both managers and entrepreneurs.

Excellent managers and experts are vital for corporate success. These “key employees” form the company’s backbone and are hard to replace. Those capable of positioning themselves in the market as an attractive employer enjoy a competitive advantage in the struggle against the shortage of skills. Occupational provisions offer entrepreneurs strong arguments via management insurance to attract the crème de la crème, for those with high incomes also wish to be well insured. However, many pension funds still do not sufficiently exploit the legal opportunities for benefit improvements and enhancements in tax planning. Management insurance offers attractive advantages not only for the insured employees but also for you as an entrepreneur.

 

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Impending funding gap

Every company is obliged to insure employees earning in excess of CHF 21 150 per year against the risks of death, disability and old age. Salaries above CHF 84 600 can be insured voluntarily (so-called supplementary benefits). Without additional insurance of the income exceeding this amount, the management and you yourself will be massively worse off in old age than during your working lives, with a funding shortfall of 40 percent and more. A well-developed pension plan will enable you as the company’s proprietor to transfer corporate profits in a tax-efficient manner to your private assets, albeit tied until retirement.

Higher savings contributions by the employer

As the employer, you are obliged to contribute at least half the contributions to the 2nd pillar (pension fund). In the competition for experts, it can also be a decisive advantage for SMEs with up to 50 employees to assume more than half the pension fund contributions as employer, as it is not just the salary and potential bonuses that serve as important financial incentives. Employees also perceive additional higher contributions to pension provision as important fringe benefits. Almost a third of all companies with ten to 250 employees make use of this opportunity and contribute beyond the prescribed share to pension fund contributions. 

Voluntary higher savings contributions by the insured

The prerequisite for supplementary insurance is that the conditions for a whole management level are based on standard, objective criteria. It can be particularly attractive for members of management to make voluntary higher savings contributions. You can establish up to three different optional savings plans for this in your employee benefits unit. Your management will then have the opportunity, for instance, of contributing 12, 14 or even 16 percent of their insured salary in a tax-efficient manner to the pension fund and at the same time improving their retirement benefits.

Selectable investment strategy

It is also possible to pursue investment strategies offering higher returns in the 2nd pillar. Salary components in excess of CHF 126 900 may be individually invested by the insured within a maximum of ten defined investment strategies. Inquire with your employee benefits institution as to whether such “1e plans” are available within the framework of a company-specific solution.

Different final age for management insurance

If the final or retirement age is set earlier in management insurance than in “basic provisions”, depending on the canton of residence the insured person can also prevent progressive tax when withdrawing retirement assets as a lump sum – a further advantage of management insurance.

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