Insurer Zurich ditches DB in Switzerland
SWITZERLAND – Insurer Zurich has switched its Swiss defined benefit pension arrangements to defined contribution - the decision affects about 6,000 employees.
Zurich said the decision was prompted by “the changed economic and demographic environment”.
The current final salary DB arrangement, which is based on group insurance contracts with Zurich Life, will cease to exist from January 1 2006. The decision will affect all employees.
Under two new DC plans, Zurich will pay contributions ranging from 2.5% and 18.75%, depending on the employee’s age, Zurich spokesman Daniel Hofmann said.
The two new schemes will have a coverage ratio of 110%, though Hofmann could not quantify their capital values.
“Future benefits at normal retirement for the current active participants are targeted to be similar to those under the present arrangements,” the insurer said in a statement.
“However, following a transition period of three years, the current additional benefits that are provided on early retirement will gradually be phased out over a nine-year period.”
Hofmann explained that under the new rules, employees retiring at 65 would be entitled to a conversion rate of 6.5%.
The conversion rate will decrease in case of early retirement. He explained, for example, that an employee retiring at 60 would only be entitled to a conversion rate of 5.75%.
The spokesman was unable to say how early retirement was dealt with under the DB regime.