Part 2: What if a loss of earning capacity eventually turns into a disability?

Mar 23, 2022.

Alongside a temporary loss of earning capacity, which we discussed in part 1, an accident or illness can also result in a permanent disability. If this is the case, then you, as the affected person, are entitled to a disability pension from Pillar 1. This article explains what this looks like and why Pillar 2 also plays a role.

Pillar 1

You should register with the Federal Disability Insurance (IV) no more than six months after suffering your loss of earnings so you can take up a disability pension. Often, your employer or their insurance will arrange this. After this is done, your level of disability will be medically clarified. A level of at least 40% is required to receive a partial pension. This is known as a quarter pension. You will be guaranteed a full pension from a degree of disability of 70%. You can find more details on the disability insurance website.

 

In some instances, it may be the case that a permanent disability is only identified after 12 months (but no more than 24 months). If an illness is the reason behind this, it can lead to a massive drop in income. State benefits are paid out from IV for a disability with a degree of disability of at least 40%, irrespective of the cause.

 

Pillar 2 – what do you need to bear in mind?

Pillar 2 also comes into play if a person is disabled, with the benefits that are actually available depending on the cause of the disability.

 

Disability as a result of an accident

In this case, the accident insurance (UVG) daily allowance, which previously accounted for 80% of a daily wage, is converted into a pension. The combined benefits from IV and UVG may make up a maximum of 90% of the insured salary (up to the maximum insurable AHV salary of CHF 148,200). Depending on the pension fund’s plan rules, additional pensions may also be included.

 

Disability as a result of illness

Benefits from a pension plan vary depending on the type of plan. They are calculated either as a percentage of the AHV salary (defined benefit plan) or depend on possible retirement assets (defined contribution plan). You can find out about this in your pension fund’s plan rules.

 

Here is a practical example: in part 1 we read that Patrick (34, married, one child) had an abdominal tumour and needed to rely on his employer’s pension system to provide him with good cover. He never read his pension certificate carefully and so did not realise that he should have also actively taken out private cover to maintain his standard of living.

 

Generali tip: Your pension certificate is a very important document. It shows exactly how your employer covers you and your family for different risks. You receive the certificate from your pension fund once a year. If you want to have your pension situation analysed by an advisor, you should bring this document and the pension fund’s plan rules with you to your appointment.

Find out more

Part 1: general information about a loss of earning capacity caused by accident or illness can be found in our article «Loss of earning capacity as a result of illness or accident».

 

Part 3: how well are self-employed workers protected in the event of an accident or illness? Find out the answer in our third article «Loss of earning capacity and loss of earnings – what self-employed workers need to know».

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