New Swiss body to fight insurers
A new association to protect Swiss small and medium-sized enterprises has been established to combat moves by insurers to reduce conversion rates and thereby cut pensions.
Credit Suisse’s Winterthur has announced that it plans to reduce its conversion from 7.2% to around 5.84% for males aged 65, and 5.45% for females aged 62 for the account balance in excess of the mandatory minimum under Swiss law.
This reduction will take effect from 1 January 2004 for all cash balance plans.
The conversion rate is the rate used to convert a member’s account balance at retirement into a lifelong annuity with spouse benefits.
Says Peter Zanella, benefits practice leader, at Watson Wyatt in Switzerland: “The news came as an unpleasant surprise for many stakeholders because it means a reduction of their projected retirement pension of about 25% and 33% for women.”
The change was approved by the supervisory authority, Bundesamt für Privatversicherung, and is now facing a public backlash. An association to protect the small and medium sized companies that will be affected was established in Bern. The ‘Schutzgemeinschaft für KMU’, headed by Swiss entrepreneur Otto Ineichen, will try to stop Winterthur and also Zurich from cutting the rates.
“The big insurers are going to burden small and medium-sized companies and their insured staff with exorbitant premium hikes and annuity cuts in their company pensions over the coming years. Numerous small and medium enterprises see their existence threatened as a result, which is why the association has been established,” says the Schutzgemeinschaft in a press statement.
The association aims to deal with complaints, assist and support the small and medium-sized companies, keeping members and the public updated on developments. The association has presented its first case against the increase in contribution rates to the Swiss department of social security. The documents are presently being analysed.
Swiss insurers are claiming that premiums must be increased and conversion rates reduced if they are to cope with the dramatic losses in funds resulting from the falling equity markets and low bond yields of the last three years.