The Swiss parliament has voted in favour of an emergency intervention, or clause d’urgence, to set up a non-interest bearing account for the occupational pension scheme Stiftung Auffangeinrichtung BVG.
“We are very pleased that both the Council of States and the National Council saw the urgency and authorised the change in the law in this legislature,” the Stiftung told IPE in a statement.
The Council of States, the upper house of the Parliament, has approved the proposal yesterday with 43 votes in favour and none opposing. The National Council, the lower house, reached the qualified majority today.
The new law will enter into force on 1 October once the Council of States and the National Council agree to support the emergency intervention, the Stiftung added.
The government had proposed a change to the occupational pension law that would allow the Stiftung to deposit a maximum CHF10m (€9.2m), interest free, in an account with the Federal Finance Administration, or Eidgenössische Finanzverwaltung (EFV), if its funding ratio fell below 105%.
The new rule is valid for three years once is enters into force – a buffer period to find a long-term solution to the problem.
The Federal Social Insurance Office (FSIO), is setting up a working group with the Federal Finance Administration immediately after the bill is passed to design long-term solutions for the institution.
The Stiftung is expected to take vested benefits – a financial package granted to employees that don’t meet the requirements to receive a full, instead of partial, benefit from pension funds – if employees cannot transfer them to another fund after the termination of an employment position, so-called Freizügigkeit.
In a message to parliament, the government warned that the combination of increasing vested benefits, negative interest rates, equity market volatility and uncertainties caused by COVID-19 pose a risk to the stability of the institution.
The Stiftung’s funding ratio fell to 105.85% at the end of May from 108.7% at the end of 2019. In March, the coverage ratio fell to 101.6%.
“The Stiftung can only fulfil its statutory mandate with a non-interest bearing account in times of negative interest rates,” the institution added in the statement.
There is a long-term risk of underfunding based on capital guarantees on the assets, which becomes very problematic because the Freizügigkeit cannot be restructured with negative interest rates, it said.