Full Insurance vs Semi-Autonomous: Which Occupational Pension Model is Right for Your Company?

In our earlier article, we explored the important topic of choosing the right occupational pension fund (BVG) for your company In this article, we will expand on one critical aspect of occupational pensions for smaller companies—especially SMEs—that do not have their own pension fund: should they opt for a full insurance model or a semi-autonomous solution?

Each model has its own advantages and trade-offs in terms of security, return potential, administrative requirements, and risk distribution. We explore both approaches in detail to help you make an informed decision that aligns with your company’s risk tolerance, financial goals, and long-term planning.

The Swiss occupational pension system (BVG), commonly known as the second pillar, plays a critical role in supplementing the first pillar (state pensions). It aims to help ensure employees maintain their standard of living after retirement, as well as providing disability and death benefits.

BVG is mandatory for employees earning over CHF 22,680 annually (as of 2025), and optional for employees earning under this threshold and for self-employed individuals. Employers and employees share the contributions, with employers being legally obliged to contribute at least 50%.

Collective foundations for smaller companies

Smaller SMEs that are not in a position to manage their own pension fund often join a collective foundation. These occupational pension schemes are typically managed by private insurance companies, community schemes, industry groups or professional associations. They pool contributions from multiple employers, allowing companies to benefit from shared expertise, lower administrative costs, and diversified investment strategies.

Within this framework, employers must choose between two main management models:

1. Full insurance model: All contributions are channeled into an insurance product with a conservative investment strategy. The insurance company manages the investments and guarantees all benefits, including both the retirement savings and risk-related benefits such as disability and survivors' pensions.
2. Semi-autonomous solution: The pension fund or collective foundation manages investments independently while only insuring the risk benefit portion (i.e., disability and survivors’ pensions). This results in a greater equity component and exposes the employer and employees to some market risk.

You can find out more about pension options for the self-employed here: Pension fund for sole proprietorships and self-employed persons

How do semi-autonomous solutions work?

Semi-autonomous pension solutions offer a different approach. In this model, the pension fund manages the investment portfolio independently, while an insurance component covers specific risks such as death and disability. The retirement capital, however, is invested directly in the financial markets. This approach offers the potential for higher returns if market conditions are favorable.

Key advantages of semi-autonomous solutions

• Higher return potential: The primary benefit of a semi-autonomous model is its potential for higher interest on retirement savings. With a more aggressive investment strategy, companies and employees can benefit from the upsides of market performance.
• Flexibility in investment strategy: Unlike the full insurance model, semi-autonomous solutions allow the pension fund’s board of trustees—comprising elected representatives from affiliated companies—to tailor the investment strategy. This can enable companies to respond more dynamically to market opportunities and risks.
• Cost efficiency: Generally, semi-autonomous models have a more attractive price-performance ratio. Lower administrative and insurance costs can result in a more cost-effective pension solution and thereby enhance retirement benefits for policyholders.

Potential downsides of semi-autonomous solutions

While semi-autonomous solutions offer the potential for higher returns, there are some important risks to consider:

• Exposure to investment risk: Unlike full insurance, the semi-autonomous model exposes the retirement capital to market fluctuations. This means that if the financial markets underperform, the retirement savings of employees could suffer.
• Risk of underfunding: In adverse market conditions, there is a possibility that the pension fund may become underfunded (i.e. the assets of the pension fund are not sufficient to cover its liabilities). To mitigate this, a portion of the returns is typically allocated to risk reserves, and in rare cases, additional contributions may be required from employers to cover shortfalls.
• Greater administrative involvement: Companies that opt for a semi-autonomous solution may need to play a more active role in the oversight of the pension fund’s investment strategy. This may involve regular reviews and consultations with the pension committee to ensure that the strategy remains aligned with the company’s risk capacity and policyholders’ goals.

When evaluating pension fund management models, companies should consider the following key factors:

Risk tolerance

Full insurance is best for companies seeking stability for their employees’ pensions, while semi-autonomous solutions suit those willing to be exposed to market fluctuations.

Consider the following questions when assessing your risk tolerance:

How much volatility can your business withstand?

If your company has a conservative approach to risk and cannot afford unexpected financial burdens, the full insurance model—with its complete risk coverage—might be the better option.

Are you comfortable with market fluctuations?

For companies that have a higher risk appetite and can manage occasional restructuring of contributions if the market underperforms, the semi-autonomous solution may offer more attractive growth prospects.

Long-term financial planning

Employers and employees with a strong focus on maximizing long-term investment returns may prefer the semi-autonomous approach. Factors to consider include:

Future investment trends:

While conservative investments provide security, they might not keep pace with inflation or evolving market opportunities. A semi-autonomous model, with its flexible investment approach, can better outperform inflation over the long term.

Demographic developments:

With rising life expectancy and changing workforce demographics in Switzerland, companies need a pension solution that can adapt to longer retirement periods. For this reason, semi-autonomous pension models are becoming increasingly preferred as they generally provide higher pension returns over a longer period.

Administrative capacity and expertise

Full insurance models minimize administrative effort, whereas semi-autonomous models may require more active oversight. Smaller companies often lack the in-house expertise and resources to manage a complex investment strategy. Employers should thus consider that:

Full insurance reduces the need for detailed internal oversight and can be implemented with relatively low administrative overhead.

Semi-autonomous models require a greater level of engagement from company representatives. However, this is generally manageable for SMEs, especially those with access to external advisory services.

Desired flexibility

The ability to customize a pension plan to the specific needs of your company can be an important factor:

Semi-autonomous models:

Often offer greater customization in terms of contribution levels, investment strategies, and risk-sharing arrangements. Companies can adjust the strategy over time as market conditions and internal requirements change.

Full insurance models:

While offering less flexibility, they provide a one-size-fits-all solution that guarantees a predetermined level of benefit without the need for frequent adjustments.

Recent industry trends indicate a growing preference for semi-autonomous pension solutions among Swiss companies Several factors are driving this shift:

Low interest rates

Persistently low interest rates in traditional fixed-income investments have made the conservative full insurance model less appealing. The potential for higher returns in a semi-autonomous model can better offset the impact of low guaranteed rates.

Regulatory developments

Increasingly strict investment rules for occupational pension funds have made it more difficult for full insurance pension fund models to achieve the type of returns needed to finance the guaranteed benefits they offer.
These evolving regulatory frameworks encourage pension providers to offer more flexible, responsive solutions. This trend is reflected in the increasing number of collective foundations that favor a semi-autonomous approach.

Changing demographics

Rising life expectancy is extending retirement periods in Switzerland, which has led many companies to re-evaluate how to best secure adequate long-term pension benefits. The modest returns achieved with full insurance pension models may no longer be sufficient to properly provide for policyholders during retirement.
Semi-autonomous models that offer a better balance between risk and return are seen as more adaptable to these demographic changes due to their ability to generate higher long-term returns.

Key takeaway

Industry analysts suggest that while full insurance models continue to appeal to those prioritizing security, the dynamic nature of today’s financial markets and the need for more adaptable investment strategies that generate higher long-term returns have led many providers and companies to switch to semi-autonomous solutions.