The Swiss pension fund association ASIP has tabled a new proposal for the reform of the second pillar pension system as an alternative to the social partners’ model backed by the government.
The core element of the proposal refers to financing the measures to compensate for the reduction of the conversion rate to calculate pension pay-outs (Umwandlungsumsatz).
The conversion rate cut from 6.8% to 6.0%, which is part of the government-backed reform, would lead to a 12% drop in pension benefits, according to consultancy C-alm numbers presented by ASIP in a webinar.
The association proposes to compensate for the cuts with an increase to occupational pension savings over a transition period of 10 years financed with Pensionskassen reserves.
The in-house financing of benefits erases “unnecessary” redistribution mechanisms in the pension system, ASIP said, adding that the new solution counts on existing reserves that the Pensionskassen had to set aside due to a high conversion rate.
The increase in savings would replace the idea of the supplement foreseen in the reform of the social partners Swiss Employers’ Association (SAV), Swiss Trade Union Federation (SGB) and Travail.Suisse, and financed with contributions of 0.5% of the annual income subject to the first pillar AHV.
According to the reform’s draft, recipients of old-age and disability provisions of occupational pensions will receive a lifelong monthly pension supplement that gradually decreases every five years during a transition period of 15 years, from CHF200 to CHF100.
Asked if an increase in retirement savings through reserves could put pressure on pension funds in the future, ASIP managing director Hanspeter Konrad told IPE that “on the contrary”, the association’s model cuts the burden on pension funds.
“Our compensation measure leads to exactly the same result for the insured persons as if the conversion rate were to decrease over 10 years from 6.8% by 0.08 percentage points per year to 6.0%,” he added.
Alternatively, ASIP said, a lower Koordinationsabzug would mean a higher salary insured to keep up a certain level of pension if the conversion rate drops.
The Koordinationsabzug is a wage deduction subject to AHV to determine the salary insured in the second pillar pension system, and now corresponds to 7/8 of the maximum AHV annual pension, or CHF25,095 (€23,000) for 2021.
ASIP proposes to reduce the Koordinationsabzug to 60% of the AHV pensions, or CHF21.330.
This would improve the situation of insured persons with lower income, women and part-time workers, and at lower costs compared to the Federal Council’s proposal, it said. The federal council has proposed a reduction of the Koordinationsabzug to CHF12,443.
The reform proposed by the government and the social partners for the second pillar will have to overcome the upcoming parliamentary debate. ASIP expects that its ideas will be debated, and ultimately accepted.
“Why should someone, especially in the current environment with the effects of the COVID-19 pandemic, add new levy on the income of employees and burden employers with new costs instead of using reserves created precisely for this purpose in the past?,” Konrad asked.
ASIP’s proposal, designed in partnership with the builders association Baumeisterverband, Swiss Retail Federation and the association for employers in banking, has seen meanwhile the support of over 30 other associations, Konrad said.
ASIP’s president Jean Rémy Roulet has also called on politicians “to send a clear signal for a strong second pillar.”
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