SWITZERLAND – ASIP, the Swiss pension fund association, has warned against removing parts of the recently presented pension reform agenda.
Over the summer, the government unveiled its ‘Altersvorsorge 2020’ reform plans, addressing both the first and second-pillar systems, as well as long-debated issues such as the minimum return and the minimum conversion rate.
But, in the meantime, a Swiss MP of the FDP party has brought forward a motion to change the setting of both minimum rates from a political negotiation process to an automated process depending on a number of parameters, including financial markets.
The motion was approved by one chamber of Parliament last week.
But ASIP, while supporting the “de-politicising” of rate-setting, said the motion made little sense and warned against breaking the proposed reform “into pieces”.
In a recent commentary, Christoph Ryter, president at the association, said: “In the end, the reform will only be successful if it is a balanced political compromise.”
And at a Swisscanto event yesterday, Hanspeter Konrad, director at ASIP, said: “All those who are already challenging the package based on a political or personal agenda are recklessly putting our pension system at risk.”
In the commentary, the association added that, if the “urgently necessary” pensions reform failed, it would “destroy Switzerland as we know it” and completely undermine trust in the second pillar.
At the Swisscanto event, Dieter Stohler, managing director of Switzerland’s largest pension fund, Publica, recommended increasing contributions to the second pillar to cushion the effects of a lower conversion rate.
His own fund, which has already cut both the conversion rate and the discount rate, is in a “comfortable position” at the moment, he added.
Increasing cost transparency in the second pillar is also part of the reform, as it was part of the structural reform currently being implemented.
But in a recent newspaper article in the local media, Werner Schiesser, a member of the board at Swiss accountancy firm BDO, argued that the new total expense ratio (TER) might actually hinder returns.
He said gathering the necessary data to calculate a TER at sub-fund levels might require too much effort for pension funds.
He added that this, in turn, might prevent them from investing in higher-yielding instruments needed to achieve state-required minimum returns.