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Impact Investing

IPE special report May 2018

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A question of faith

"We want to strengthen faith in the second pillar," the Swiss government frequently points out when defending its plans for structural reform of the Swiss mandatory occupational pension system. But according to the Swiss pension fund association ASIP, it is not individuals' faith that needs strengthening.

Prior to its annual member conference in May 2011 the association commissioned a survey among 1,000 Swiss above the age of 15, which showed that faith in the second pillar has grown since 2009.

Around 15% said they absolutely trusted Pensionskassen and as much as 65% said they largely did. The share of people with "absolute faith" increased to 31% when asked about their own Pensionskasse.

The pension they will be getting from the system is "absolutely" or "rather safe", thought 68% of those polled - in 2009 only 55% had shared this assessment.

ASIP also commissioned Demoscope Research & Marketing to question people on their willingness to pay higher administration fees for tighter regulations. Around one third said they were "absolutely not" prepared to pay more. Another 25% said they would "rather not". Only 7% gave an absolute yes and another 19% a "yes, maybe". The rest said they did not know.

"That means the public would reject a large part of the decrees leading to higher costs if asked directly - indeed these costs are reducing the members' benefits," ASIP noted in a press release.

But interior minister Didier Burkhalter, who also spoke at the ASIP conference, renewed his view that the negative headlines on some problems in the second pillar over the last years had generated "disappointment and resentment" among the public. "And trust in general, not only in the second, pillar has suffered from this - that is a fact," he stressed.
The government is convinced that the overwhelming rejection of a further lowering of the conversion rate in a referendum in March last year was proof of that.

However, ASIP is convinced that the 73% of the electorate who voted against the proposal for a further cut in the conversion rate only rejected it because they wanted to see skirting measures to alleviate the financial burden.

ASIP's suggestion to make the governance charter its members had adopted in 2009 generally binding was refused by the minister. He argued that the law passed by parliament on the structural reform included the remit to introduce sanctions in case of certain violations of governance principles and such measures are not part of the ASIP charter.

"The decrees should be carefully weighed between necessary regulation and a system that is as liberal as possible," Burkhalter noted. He promised that all the statements received during the consultation phase will be carefully reviewed. The government is expected to make a decision on decrees implementing the structural reform before the summer.

"These issues have to be discussed - sometimes in tough debates but always fair," Burkhalter stressed.

A few days prior to the event, Yves Rossier, head of federal social insurance, had told the Swiss daily newspaper Neue Zürcher Zeitung that he had been "surprised at the harshness" of some of the statements entered during the consultation phase. He had alleged that a PR agency had been hired by participants, and that this was the reason why there were almost 250 identical letters among the 500 statements received.

Herbert Brändli, head of the multi-employer fund Profond and founder of the Pensionskassen advisory and service provider B&B Vorsorge, felt indirectly criticised as his organisation had rallied a lot of support for the rejection of the structural reform.

"The consultation is not a PR joke," he wrote in an open letter to the editor, adding that the allegations of using a PR company were wrong and that even indirectly playing down the statements by mentioning this rumour was "cheap". "These are statements from committed SMEs and retirement provision companies," Brändli noted.

Critics of the reform mainly argue that it will increase costs and curtail pension fund boards. But in his speech at the ASIP conference Burkhalter said: "People in charge at Pensionskassen which already have a modern governance structure in place today are of the opinion that the structural reform does not bring a significant financial burden."

He went on to say that the proposed new regulations should not be seen as a general lack of faith in all people managing pension money but as necessary steps towards more transparency and "clear rules which generate faith".

In a blog-entry on the website of the Vorsorgeforum, a portal on information regarding the second pillar, it was noted that Burkhalter's speech was "highly anticipated" and that he has to be given credit for not avoiding the hot topic. "But - as was to be expected - he did not elaborate on specific points of criticism," the blog-author noted. In total, Burkhalter mentioned the word "faith" 10 times in his roughly 20-minute speech. So what it comes down to is a question of faith.


 

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