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Swiss pension association sees reform demands adopted by lower chamber committee

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A parliamentary committee in Switzerland’s lower chamber has adopted its version of Altersvorsorge 2020, a comprehensive pensions reform package, which includes measures having been sought by the country’s pension fund association.

The Altersvorsorge 2020 (AV2020) reform package has been making its way through the legislative process after the Swiss executive put forward the proposals in 2014.

The upper house of parliament, the Ständerat, deliberated the reform package in September 2015, and last week it was the turn of the lower chamber, with its committee for social security and health (SGK-N) to carry out its second reading of the AV2020 proposals.

The committee revealed its reform proposals last Friday afternoon, 19 August, with ASIP, the Swiss pension fund association, noting that the committee departed from the position of the upper house “on crucial points”.

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However, it said that the success of the reform package remains a “tricky tightrope walk”, and that “extreme demands” could jeopardise it. It reiterated its appeal for all stakeholders to be prepared to make compromises to ensure that much-needed pension reform is seen through and successful.

One of the key aspects of the reform package affecting second pillar pensions is the proposal to lower the conversion rate, the Umwandlungssatz, which is used by occupational pension schemes to calculate pension benefits from accrued assets.

The government’s AV2020 proposal envisaged lowering this from 6.8% to 6%, and the Ständerat and most recently the Nationalrat committee have also adopted this proposal.

Where there are differences, however, is with respect to the measures to offset the impact of the lower conversion rate: the Ständerat came up with a different model to that of the executive, and the Nationalrat committee’s proposal diverges from the executive’s and the upper chamber’s. 

The SGK-N described said that the Ständerat’s model was “counterproductive” and would place more burden on future generations without presenting a structural solution.

ASIP says that the current second pillar target pension benefit must be maintained in order for the lowering of the minimum conversion rate to be socially acceptable.

It welcomed the Nationalrat committee’s proposal for measures for the “transition generation”, which for the SGK-N are those beneficiaries who will be 51 years old by the time the reform enters into force.

One of the pension fund association’s key demands has been for a decentralised approach to be taken to finance the measures compensating for a lower conversion rate.

The idea is that it would be up to affected individual pension funds to decide how to do this rather than this being dealt with within the state system; many Swiss pension funds already apply a lower conversion rate.

The decentralised model being sought by ASIP was adopted by the Nationalrat committee, which ASIP said took into account one of the industry’s concerns.

The Ständerat had proposed a centralised financing model, which would involve a central protection fund funding supplementary payments for the transition generation, which in its version counts beneficiaries from the age of 50.

The next event influencing the AV2020 reform package’s path is a referendum in September on AHV-plus, a trade union-initiated proposal for a 10% increase in the state pension. It runs counter to the government agenda of controlling costs and could have a bearing on the AV2020 reform drive.

Thereafter it will be the turn of the full lower house of chamber to deliberate its committee’s reform package, with a final parliamentary vote needed by the spring to ensure there is sufficient time to hold a subsequent referendum under Switzerland’s direct democracy rules. 

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