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Swiss pensions reform 'helps wrong people', think tank warns

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The amended reform proposal on the major Swiss pension reform package Altersvorsorge 2020 includes an immediate hike in the first-pillar AHV to compensate a cut in the minimum conversion rate in the second pillar.

But Swiss think-tank Avenir Suisse has criticised that more people will benefit from the AHV increase than suffer from the conversion rate cut.

“Watering daisies with a fire hose” is the Swiss colloquialism Jérôme Cosandey, researcher at Avenir Suisse, used to describe changes to the bill proposed by the smaller chamber of the Swiss Parliament last week.

He argued that the original government proposal already accounted for compensation for the cut in the conversion rate and that an immediate hike in the AHV would “help the wrong people”.

He said not all people eligible to a first-pillar pension would be affected by the cut in the conversion rate.

The others are either not insured in the second-pillar BVG because they earn too little or because they are self-employed and have not opted in, he said. 

When the reform takes effect, people over 50 years of age will be exempt from any changes to their pension promises thanks to a 15-year transition period – their share is redistributed among other active members.

But, of the approximately 2.5m people possibly affected by the conversion rate change, only a fraction will actually feel it, Cosandey said.

He said the majority of people in the BVG were actually in a Pensionskasse, which can already apply a conversion rate well below the proposed cut to 6%.

This is possible because their employer makes above-mandatory contributions to which any conversion rate can be applied.

Additionally, less than 50% of people are drawing a life-long pension from their Pensionskasse.

The remainder is taking out the capital for which the conversion rate is irrelevant or opting for a mixed payout of pension and capital.

“Eventually,” Cosandey said, “it is less than 15% of people eligible for an AHV pension that might potentially be affected from a reduction of the conversion rate from 2033.”

He called for a solution that helped this minority in 18 years, rather than increase the AHV for everyone as soon as the reform comes into effect.

The outcome of the reform talks will also depend on the outcome of the general elections scheduled for 18 October.

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