The Swiss government is recommending the adoption of the reform of the second pillar pension system in a referendum that will take place on 22 September.

The cabinet deems the reform necessary to finance pension provisions of members that are mandatory required to join a pension fund because they earn between CHF22,050 (€23,000) and CHF88,200 per year, so-called BVG-Obligatorium, it said in a statement today.

If the public votes in favour of the reform, an 80% share of wages will be insured under the second pillar in the future — a significantly larger part than today’s insured salary of low earners, with the amount of pensions expected to be significantly higher for those people.

The reform would improve retirement provisions particularly for women, who have lower incomes compared to men, it added.

With the reform, already approved by parliament last year, the minimum wage threshold to join a pension scheme will decrease to CHF19,845 per year, from the current CHF22,050.

This will lead to an increasing number of people becoming a member of Pensionskassen for the first time, the government noted.

Unions are campaigning against the reform, using the argument that the changes will mean further reducing the level of pensions, and additional costs to the system.

The Swiss Federation of Trade Unions, SGB USS, said that particularly women will pay the price of the reform, with contributions increasing, but slimmer pension being paid out. The reform, in fact, will lower the conversion rate to calculate pension payouts to 6%, from the current 6.8%.

The reduction of the conversion rate is compensated by a lifelong pension supplement of a maximum of CHF200 per month for people reaching retirement age within 15 years of the reform coming into force, a measure that will cost approximately CHF800m per year, financed by pension funds and contributions of employees and employers.

The reform will have an impact mainly on pension funds that only offer the legally required minimum benefits, or little more. Most employees have occupational pension plans going far beyond the statutory minimum benefits, the government said.

ASIP, the pension funds association, and the Swiss Employers’ Association (Schweizerische Arbeitgeberverband) back the reform.

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