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Minimum interest rate on Swiss second-pillar pensions cut to 1%

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Swiss Pensionskassen will have to pay an interest rate of at least 1% on active members’ mandatory contributions as of 1 January next year after the government adopted the recommendation of an independent commission.

The government has always followed the recommendations of the BVG Kommission on the minimum interest rate (Mindestzins).

In early September, the commission recommended lowering the rate from 1.25% to 1%, and the federal council (Bundesrat) today decided that the new rate would be 1%.

This is the lowest the rate has ever been in Switzerland.

It remained stable at 4% until 2000, but since then it has been, for the most part, cut.

In announcing its decision, the federal council cited the recommendation of the commission and said it decided to lower the rate because of low interest rates and “unsatisfactory” performance in the equity markets.

It noted that the yields on Swiss government bonds had fallen to record lows, with the seven-year bond yielding -0.73% at the end of September compared with -0.39% a year before.

It said real estate offered a more attractive return but pointed out that this market only accounted for 18% of occupational pension assets.

The Swiss trade union federation used the federal council’s Mindestzins decision as an opportunity to push its position in the debate over the AV2020 reform package in Switzerland.

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