2024-08-23 07:38:43
Following our first two articles, you now know more about what occupational pensions provision is and how it works.th In the article, we discussed the conditions and amount of annuities in the event of death or disability in occupational pensions. Of course, these are aspects that we do not consider at the beginning, but they are very important for our loved ones and ourselves.
The concept of disability in AVS and LPP
In the context of providing occupational pensions, it is crucial to understand the definition and application of the concept of disability, as it plays a central role in the assessment of pension rights. In fact, the concept of disability in the AVS and LPP is the same, which means that the degree of disability recognized in both systems will be the same. For example, if the degree of disability is 60% in the AVS, then the degree of disability recognized in the LPP will also be 60%.
However, it is important to note that the coverage of professional insurance only applies to paid activities below the actual employment rate. To illustrate this, let us take the example of Ms. “M”: if her employment rate is 60% and her degree of disability is determined to be 50%, she will receive a pension equivalent to 50% of her employment rate, or 30% of her reference income.
Furthermore, unlike AI, the CPF assesses disability rates based on the income of the effective person corresponding to the activities actually performed, rather than based on hypothetical full-time paid activity. This distinction is critical to understanding the financial impact and the protection provided to the policyholder in the event of disability.
The issue of occupational pension disability pension (LPP) is of critical importance to many people who are facing difficult circumstances. Whether you are already in this situation or want to foresee it, it is essential to understand the eligibility criteria to benefit from this pension.
Minimum disability rating required
Firstly, the disability must be at least 40% according to the criteria of Disability Insurance (AI). This threshold constitutes the first step to obtaining LPP benefits. In addition, you must belong to a provident fund institution when you make a request due to loss of ability to work.
Exceptions for people born with disabilities
There are exceptions for people who were disabled at birth or before reaching adulthood. These people can apply for disability benefits if their degree of incapacity to work was between 20% and 40% when they started gainful activity. They must be insured when their incapacity to work worsens to at least 40%.
Special functions of some workers
For partially disabled persons who are gainfully employed, compulsory occupational insurance applies only if the degree of disability is less than 70%. The applicable amounts, such as the minimum wage of CHF 22,050 (as of January 1, 2023) and the coordination deduction of CHF 25,725 (as of January 1, 2023), will be reduced in proportion to the pension rate. On the other hand, those who receive a full pension, i.e. those with a disability of 70% or more, are not subject to compulsory occupational insurance.
The amount of pension depends on the disability rate
The amount of the pension varies according to the degree of disability:
- Disability of 70% or more: full pension.
- For disability rates between 50% and 69%: the pension corresponds to the disability rate.
If the disability rate is less than 50%, the amount of pension shall be determined in accordance with the following provisions:
Annuity conditions upon death
In case of death, the conditions of a widow’s or widower’s pension provide that the deceased must have been in a welfare institution at the time of death or death due to incapacity for work. The surviving spouse can receive this pension if he or she has dependent children or is over 45 years old and has been married for at least five years. The amount of the widow’s or widower’s pension is equal to 60% of the disability pension that the insured person would have received.
If the conditions for annuity are not met, a lump sum benefit may be paid. This consists of three annual annuities in the form of a single benefit. In addition, children, including children in care, may receive an orphan’s pension up to the age of 25 under certain conditions, which is equal to 20% of the insured person’s disability pension.
Benefits to other beneficiaries
Other relatives of the deceased, such as a partner, parent, sibling or other legal heirs, may also be entitled to benefits, depending on the rules of the pension agency. The amount of these benefits is determined by the agency’s rules and is based on the contributions paid by the insured person or 50% of the pension capital.
These conditions may seem complicated, but they are put in place to protect individuals and their families during difficult times. In the next article, we will look in more detail at the conditions for the free transfer of second pillar assets. Stay tuned to learn more!
In the next article we will discuss the conditions for free transfer of assets from 2th pillar.
Articles by the same author:
Pillar 2 – Everything you need to know about the Professional Pension Provision (LPP)
Pillar 2 – Contributions to the LPP, how do they work?
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