What's the difference between the enveloping & split method?

The basics: Mandatory and non-mandatory

In occupational pensions (OPA), your retirement savings consist of two parts:

The mandatory part: This is the legally required minimum that every employee must save.
The non-mandatory part: These are all savings contributions that exceed the legal minimum. Many pension plans, like those from Tellco pk, offer significantly better benefits than required by law to enable a higher old-age pension.

The conversion rate is the percentage used to convert your total saved retirement savings into a lifelong pension. The way this rate is applied to the two parts of the savings is what distinguishes the enveloping method from the split method.

The two methods in direct comparison

Feature	Enveloping method	Split method
Basic principle	Mandatory and non-mandatory savings are treated as a single unit.	Mandatory and non-mandatory savings are treated separately.
Conversion rate	A single, uniform conversion rate is applied to the entire retirement savings.	Two different conversion rates are applied: one for the mandatory part and one for the non-mandatory part.
Advantage	Simplicity, transparency, and better planning for the insured persons.	Allows for a differentiated calculation that aligns exactly with legal requirements.
Effect	Can lead to a more stable pension calculation, as the non-mandatory part benefits from the same rate.	The conversion rate for the non-mandatory part is often lower than for the mandatory part.

A practical calculation example

To illustrate the difference, let's compare the two methods with an example. Assume your total retirement savings amount to CHF 600,000. Of this, CHF 250,000 is mandatory and CHF 350,000 is non-mandatory.

Calculation with the enveloping method:
A uniform conversion rate of, for example, 5.8% is applied to the entire savings.
Calculation: CHF 600,000 x 5.8% = CHF 34,800 annual pension.
Calculation with the split method:
The legal minimum conversion rate (e.g., 6.8%) applies to the mandatory part, and a lower rate (e.g., 4.8%) applies to the non-mandatory part.
Calculation: (CHF 250,000 x 6.8%) + (CHF 350,000 x 4.8%) = CHF 17,000 + CHF 16,800 = CHF 33,800 annual pension.

In this scenario, the enveloping method results in a higher annual pension.

The enveloping method at Tellco pk

Tellco pk applies the enveloping method. This approach ensures a uniform and comprehensible basis for calculation. Specifically, this means: a single conversion rate is applied to your entire retirement savings – both the mandatory and the non-mandatory parts. This simplifies the planning of your future pension.

How to check your personal situation

Would you like to know your personal conversion rate and what pension you can expect? You can easily find out with the following steps:

Open your insurance certificate: Log in to our online portal ePlix to access your digital insurance certificate.
Find the conversion rate: Look for the "conversion rate" shown in the certificate. At Tellco pk, this rate is applied to your entire retirement savings.
Check your benefits: Your insurance certificate shows you the projected amount of your old-age pension based on your current savings and the applicable conversion rate. You can find more information about the insurance certificate here.

Do you have any further questions?

The topic of occupational pensions can be complex. If you would like to learn more about how your pension is calculated or have questions about your pension plan, we are here to help. Please do not hesitate to contact us.

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