Second Pillar 1e Savings Plans: Are They Worth It for Swiss Employees?

The 1e savings plan sits in a strange corner of Swiss retirement planning, simultaneously one of the most powerful wealth-building tools available to high earners and one of the least understood. While most employees accept their standard Pensionskasse (pension fund) allocation without question, a growing number of Swiss professionals earning above CHF 135,000 are discovering they can shift a portion of their second pillar contributions into equity-heavy strategies that could dramatically alter their retirement outcomes. But this advantage comes with a catch that rarely makes it into the marketing materials: your investment freedom is entirely dependent on your employer’s willingness to offer the plan, and leaving the company can force you back into the conservative fold.

What Makes 1e Plans Different from Standard BVG Coverage

The standard Berufliche Vorsorge (occupational pension) under the BVG/LPP (Occupational Benefits Act) operates like a cautious pensioner, spreading contributions across bonds, real estate, and a modest equity slice that rarely exceeds 30-40%. The 1e plan, named after the corresponding ordinance, breaks this mold for higher salaries. Once your income crosses the coordination threshold of CHF 135,000 (as of 2026), contributions on earnings above this level can be directed into a separate investment pot with far greater flexibility.

Many international residents express confusion about how this actually works. The system splits your salary into bands: from CHF 22,680 to CHF 135,000, you pay into the standard Pensionskasse with its regulated investment limits. Anything from CHF 135,000 up to CHF 900,000 can potentially flow into a 1e plan, if your employer offers one. This creates a two-tier retirement system within a single workplace, where colleagues earning different salaries receive fundamentally different investment opportunities.

The research reveals a striking pattern: employees who qualify for 1e plans report that just one-quarter of their second pillar contributions directed into the equity-heavy option can generate nearly half their total pension value by retirement. This mathematical reality stems from the power of compounding, when one portion of your portfolio grows at an assumed 4% real return while the rest plods along at 1-2%, the gap widens dramatically over decades.

The 100% Equity Promise vs. Reality

The prospect of allocating 100% of pension contributions to equities sounds revolutionary in Switzerland’s traditionally conservative retirement landscape. Providers like VZ Sammelstiftung explicitly advertise this possibility, stating that “Kadermitarbeitende können ihren Aktienanteil auf bis zu 100 Prozent erhöhen” (executive employees can increase their equity share to up to 100 percent). This promise attracts professionals comfortable with market volatility who understand that decades-long investment horizons favor equity exposure.

However, practical implementation tells a more nuanced story. One employee whose company uses Finpension discovered the actual maximum equity allocation reaches only 80%, with the remainder split among bonds (10%), real estate (9%), and cash (1%). This limitation might stem from employer risk management policies rather than legal constraints, but it highlights a critical point: the advertised flexibility often encounters practical guardrails. Another user reported achieving 99% equity through the same provider, suggesting these limits vary by company negotiation.

The difference matters enormously. Using the Swiss Federal Statistical Office data showing Pensionskassen achieved 8.77% performance in strong years like 2025, while the UBS Pension Fund Index averaged 5.81%, the gap between conservative and aggressive strategies becomes tangible. Over 25 years, this 2.96% annual difference transforms a CHF 200,000 contribution into either CHF 685,000 or CHF 1,185,000, an CHF 500,000 divergence that determines whether you retire at 60 or keep working until 65.

The Portability Trap That Can Erase Your Strategy

The most significant yet under-discussed risk involves what happens when you leave your employer. Unlike Säule 3a (Third Pillar) assets that travel with you regardless of employment, 1e plans remain tethered to your company’s chosen provider. If your new employer doesn’t offer a 1e option, your accumulated equity-heavy assets cannot remain in their high-growth configuration.

Swiss pension law requires that when you exit a company with a 1e plan, the assets must transfer either to your new employer’s standard Pensionskasse or to a Freizügigkeitseinrichtung (vested benefits institution). These institutions typically offer only conservative, pre-packaged strategies, often the same bond-heavy portfolios you were trying to escape. Your carefully constructed 100% equity allocation instantly reverts to 25% stocks, 50% bonds, and 25% real estate, or similar conservative mixes.

This creates a perverse incentive structure. High-earning professionals might avoid career moves that would trigger this forced reallocation, effectively trapping themselves in positions they would otherwise leave. The portability problem turns what appears to be a personal finance advantage into a potential career constraint. Many international residents report frustration with this limitation, calling it one of the most significant drawbacks of the Swiss pension system for mobile professionals.

Provider Landscape: Fees, Flexibility, and Fine Print

Not all 1e providers deliver equal value. The market splits between specialized pension foundations like Finpension and traditional banks such as VZ (VermögensZentrum) and Vontobel. Each comes with distinct trade-offs.

Finpension attracts companies with competitive fees and digital-first administration. Users generally praise the platform’s transparency and lower costs, though some note the equity limitations discussed earlier. The provider’s structure allows for relatively straightforward implementation once an employer commits.

VZ Sammelstiftung markets itself aggressively to executives, offering the coveted 100% equity option. However, this flexibility may come with higher administrative fees or require minimum investment thresholds that smaller companies cannot meet. The trade-off between maximum investment freedom and cost efficiency requires careful analysis.

Vontobel, mentioned negatively in the research, illustrates the provider risk vividly. One employee described their company’s Vontobel plan as offering “actively managed slop with insane product costs.” This critique highlights a crucial point: 1e plans can become vehicles for expensive, underperforming active management that erodes the equity premium you’re chasing. The freedom to choose high equity allocation means little if the underlying funds charge 1.5% management fees while delivering sub-index returns.

The Real Math: When Does It Actually Pay Off?

To determine whether fighting for a 1e plan makes sense, run the numbers for your specific situation. Consider a 40-year-old earning CHF 200,000 annually. Their contributions above CHF 135,000, approximately CHF 65,000, would generate around CHF 13,000 in annual 1e contributions (split between employee and employer).

If this CHF 13,000 grows at 7% annually (realistic for 100% equity over long periods) versus 3% in a standard plan, the 25-year difference at age 65 reaches CHF 420,000 versus CHF 235,000. That CHF 185,000 gap represents nearly eight years of additional retirement income. Even accounting for the fact that only about one-quarter of total second pillar contributions flow into the 1e plan, the outsized returns create a retirement portfolio where the aggressive portion dominates the final value.

But this calculation must be discounted by the probability of employer change. If you have a 30% chance of switching companies within ten years to one without 1e, and that switch forces reallocation to a 3% return portfolio, the expected value of the strategy diminishes. This risk-adjusted return analysis rarely appears in employer presentations but forms the core of a rational decision.

Regulatory and Market Risks Beyond Your Control

The 1e plan’s flexibility exists at the discretion of regulators and lawmakers. The BVG/LPP framework undergoes periodic revision, and future changes could restrict equity allocations or impose additional capital requirements on providers. While current policy favors giving employees more investment control, Swiss financial regulation has a history of tightening after market crises.

Market risk itself remains ever-present. The BFS data shows Swiss Pensionskassen lost CHF 105.1 billion in 2022, a stark reminder that equity-heavy strategies suffer during downturns. A 100% equity 1e plan would have experienced similar losses, though participants generally accept this volatility given their long investment horizons. The key difference: standard Pensionskassen spread losses across all members, while 1e participants absorb them directly in their individual accounts.

How to Evaluate If 1e Makes Sense for Your Situation

Before lobbying your employer or celebrating your plan’s availability, ask yourself three questions:

1. How stable is your employment? If you anticipate remaining with your current company for at least 10-15 years, the portability risk diminishes. For those in industries with frequent job changes or who actively manage their careers, the forced reallocation risk may outweigh potential gains.

2. What are the actual fees and fund options? Request the complete All-in-Fees and examine the underlying funds. If the provider charges above 0.5% annually or uses expensive active management, calculate whether the equity premium survives fee drag. This analysis mirrors the scrutiny you should apply to Säule 3a providers, where fee differences compound dramatically over time.

3. Does your risk tolerance match the strategy? The psychological challenge of seeing your pension account drop 30% during a market crash tests even seasoned investors. Unlike discretionary investment accounts, you cannot access these funds to rebalance or withdraw. Ensure your commitment to 100% equities extends through full market cycles.

Making the Pitch to Your Employer

If your company doesn’t offer a 1e plan, approaching HR requires strategic framing. Many HR departments dismiss the request citing administrative burden or cost. Instead, target the pension fund’s employee representatives (Pensionskassenkommission), who hold actual decision-making power.

Frame the argument around talent retention and cost neutrality. Emphasize that competitors increasingly offer 1e plans as executive perks, and implementation costs have dropped with modern providers. Avoid focusing solely on personal gain, present it as aligning employee interests with company success. One successful approach involved showing that the CHF 500 annual administrative cost per participant pales compared to the retention value of keeping high earners satisfied with their compensation package.

The Verdict: Worth It, But With Eyes Wide Open

For Swiss employees earning above CHF 135,000 with stable employment and high risk tolerance, 1e plans offer a genuine wealth-building advantage that can shift retirement timelines by years. The mathematics of compounding higher equity returns within the tax-advantaged pension wrapper create outcomes standard Pensionskassen cannot match. One participant calculated that their 1e portion, representing just 25% of contributions, would generate 50% of their total second pillar value at retirement, a staggering efficiency gain.

However, this benefit comes handcuffed to employer loyalty and provider quality. The portability trap means career moves carry hidden pension costs, and poor provider selection can erode returns through fees. The strategy works best for those who can commit to their employer long-term, work for companies with quality providers like VZ or well-negotiated Finpension arrangements, and possess the temperament to weather equity volatility without access to their capital.

The controversy around 1e plans stems from this tension: they deliver genuine financial advantage but embed structural risks that standard pension products avoid. Unlike Säule 3a, where you control provider selection and investment strategy regardless of employment, 1e plans tie your retirement strategy to corporate decisions outside your control. For many high earners, the potential gains justify this trade-off. For others, particularly those valuing career mobility, the standard Pensionskasse combined with aggressive Säule 3a investing may provide better risk-adjusted outcomes.

Before committing, model your specific scenario including employer change probabilities, and scrutinize provider fee structures. The 1e plan can be a retirement game-changer, but only for those who understand the full spectrum of risks lurking beneath the equity returns.