Defined contributions plan
The transition from defined benefits to defined contributions intended to ensure that the Pension Fund can achieve its primary objective, namely that of securing a financially healthy, sustainable and flexible occupational benefits scheme for Novartis associates in Switzerland in the future. In order to implement the new pension plan, two different legal entities were established – Pension Fund 1 and 2. Each one covers a different portion of earnings. The introduction of PF2 on January 1, 2011, enables members of the fund to have a say on their investment options in respect of a certain proportion of their insured salaries.
Pension Fund 1 basically covers annual earnings up to CHF 150 000 (including incentive/bonus, minus coordination offset). At retirement the plan provides a pension annuity with a lump sum payout option of up to 50%. In addition, there are risk benefits insured in the case of death or disability, taking into account a base salary of up to CHF 220 000 (minus coordination offset).
Associates earning over CHF 150'000 (base salary plus incentive) are offered a choice from a number of investment strategies. Each is tailored to a different investment time horizon and level of risk tolerance. At retirement and in case of disability or death in service, the plan provides benefits in the form of lump sum payments.
Employees with a base salary in excess of CHF 220,000 per year are insured in the Management Pension Fund. The savings process for retirement benefits here is built up as a defined contributions plan. For the investment of individual assets you have six investment strategies to choose from.
Benefits are paid out exclusively in the form of a lump sum.
In addition, there are risk benefits insured in the case of death or disability.