Trustee, pension assets and your trust: what fits where

If you own pension rights and a trust, the question is rarely whether a trustee can "take over" the pension. It cannot, in most cases. The real question is how a trustee, pension assets and a trust work side by side without overlap or gaps, so that what you built for your family does not contradict what your pension plan will pay out.

A trustee does this coordinating work: reading the pension documents, aligning them with the trust deed, and flagging where the two point in different directions. The pension provider remains the one that pays, on its own rules.

Start with the pension statement

The entry point is the pension statement. It tells you what kind of right you hold, who administers it, who is named to receive it, and whether those names can still be changed.

Before any structuring, a trustee will usually ask you for the latest statement of each pension and the plan rules behind it. Three questions come first:

• Is the right held through an employer scheme, an individual tied arrangement or a foreign plan?
• Who is currently named, and in which order?
• Does the plan allow a trust, or a trustee, to be named at all?

The answers decide whether the asset can ever sit in the trust, or whether the trust should simply be written to work around it. Our guide on reviewing an existing trust in ten questions shows where this check fits in a wider review.

What a trustee can and cannot do with pension rights

A trustee holds and administers assets that have been transferred into the trust. Pension rights are different: they belong to a regulated scheme, and the scheme's own rules govern who receives the benefit.

In practice, the trustee can:

• read and map each pension against the trust deed;
• recommend that your named recipients match the intentions in your letter of wishes;
• hold life insurance policies in the trust where the policy allows it;
• plan how a payout, once received, flows into the trust or to beneficiaries;
• follow up on ownership and premium arrangements.

The trustee cannot:

• override the scheme's rules or the legal order of recipients;
• redirect a pension that the law ties to specific people;
• act as if a pension were a trust asset when it is not.

The table is a general guide. Each plan has its own rules, and only an individual analysis can confirm where yours falls.

How beneficiary designations interact with the trust deed

Swiss law gives a surprising amount of weight to the person named on a pension or insurance policy, which is why the designation matters as much as the trust deed.

For recognised forms of tied individual pension, the law (Art. 82 LPP) provides that contributions are deductible when they are set aside exclusively and irrevocably for pension purposes. It also gives beneficiaries of a recognised form their own right to the benefit, and leaves it to the Federal Council to set the circle and order of recipients.

For life insurance, the Insurance Contract Act sets out several points a trustee will check:

• The policyholder may name a third party as beneficiary without the insurer's consent (Art. 76 LCA).
• The policyholder may freely dispose of the right, during life or on death, unless the policy handed to the beneficiary contains a written waiver of revocation (Art. 77 LCA).
• A beneficiary clause gives the beneficiary a right of their own over the claim assigned (Art. 78 LCA).
• Where a spouse, registered partner or descendants are named, the right is not open to enforcement by the policyholder's creditors, subject to existing pledges (Art. 80 LCA).

For a trustee, the consequence is practical. A designation that names a person directly can bypass the trust; a designation that names the trustee, where permitted, can feed it. Neither is automatically better. It depends on the purpose of the trust and on the beneficiaries. See also how the trustee, protector and beneficiary triangle shares responsibility.

An illustration

Take a fictional example: a retiree living near Lausanne draws an occupational pension and holds a discretionary trust set up years earlier for two adult children and a grandchild.

The pension statement shows a named spouse, while the trust deed assumes the children will benefit from everything. Nobody noticed the gap. The trustee, after reading both, explains that the pension pays by its own order of recipients, regardless of the deed. The retiree can then decide whether to keep that order, or to adjust the trust's distributions so the family receives a fair overall result.

The trust deed is unchanged. What changes is the plan around it, and the instructions the retiree gives afterwards.

What the service covers

This service is for settlors, beneficiaries and advisers who hold pension or insurance assets next to a trust, or who want to. It applies in situations such as:

• a retirement approaching, with a trust already in place;
• a policy that should be held by the trust for liquidity;
• a foreign pension entitlement after a move to Switzerland, or away from it;
• a trust inherited with insurance contracts nobody has reviewed.

The work usually runs in a few stages. The trustee collects documents, reads them against the deed, lists the points where they conflict, and presents the options. You decide; the trustee carries out what falls within the trust.

Typical documents include the pension statements, plan rules, insurance policies with their beneficiary clauses, the trust deed and any letter of wishes.

The service covers:

• holding of life insurance policies by the trust;
• beneficiary designations coordinated with the deed;
• treatment of foreign pension entitlements;
• liquidity from policies for future needs;
• review of ownership and premium arrangements.

If the trust is a recent one, appointing a trustee for a new trust explains how this review can be built in from the start.

What it does not cover

The trustee does not give tax or pension-law advice for your country of residence, and does not replace the pension provider. Questions about how a payout is taxed depend on where you and your beneficiaries live; they need individual advice from a qualified adviser. The trustee works with that adviser, as described in trustee compliance and reporting duties.

Where the pension is held abroad, a trust can be recognised in Switzerland under the Hague Convention, and the applicable law is the one the settlor chose, or failing that the one with the closest links (Arts. 6 and 7). Whether a foreign pension scheme accepts a trust is a separate question that only that scheme can answer. For the case of a settlor who relocates, see when the settlor moves country.

What a confidential assessment can establish

An assessment lets you see, before anything changes:

• which pension and insurance assets are connected to the trust and which stand apart;
• where designations and the deed conflict;
• whether a policy should be held by the trust, and who pays the premiums;
• which questions to put to your tax adviser and to the pension provider.

It also shows whether your current trustee is the right person to coordinate this. If you are comparing candidates, how to choose a trustee in Switzerland sets out a decision method. The trustee's remuneration depends on the structure and is explained after the assessment.