Industry experts and groups offer analysis of the referendum and its consequences for the future of Swiss pension reform 

Arbeitgeberverband/Union patronale suisse
Swiss Employers’ Association

For the second time in a year – after the AHVplus initiative – the Swiss electorate has said ‘no’ to a general increase in AHV [social security] payouts. The people do not want any experiments with our AHV. They want to secure pensions at the current level. The sovereign [people’s] message to the politicians is clear: the people want a real reform as soon as possible to secure pensions sustainably and financially stabilise retirement provision, without unfocussed and irresponsible top-ups. Now it is up to the government to quickly bring the parties as well as employer and employee representatives back to the table. A new reform should be presented within the next few months to make sure the undisputed measures can be implemented in 2020-21. To stabilise the AHV financially it needs a retirement age of 65 both for men and women as well as a moderate increase in the VAT. Additionally, the minimum conversion rate has to be lowered and compensated with measures within the occupational pension system accordingly. The four parties in the government have so far agreed on these three central points. On this basis a sustainable, broadly supported reform draft can quickly be drawn up. 

Jean Rémy Roulet, president
ASIP, the Swiss pension fund association

An immediate fresh start is necessary after the ‘no’. Despite the no the Swiss people gave the reform of retirement provision, the discussion on a sustainable retirement provision has to be continued urgently as economic and demographic challenges are increasing year by year. The no-vote issued by the Swiss people to the reform draft Altersvorsorge 2020 should not be understood as a no to a fundamental reform of the retirement system. It now needs a reform solving the most urgent problems: proportionate additional means for the AHV to cover the pay-as-you-go deficit, a sensible increase in the flexibilisation of the retirement age as well as a lowering of the BVG conversion rate with compensatory measures within the BVG to keep the level of payments up. ASIP continues to advocate realistic parameters in occupational pensions to ensure the payout promises that were made can eventually actually be kept. The increasing life expectancy and the falling returns are leading to an undisputed cross-financing of the pensioners on the backs of active contributors. ASIP supports a holistic view on the retirement provision but it demands some focus. A new draft of the reform should not clutter the cartload or overstrain the financial resilience of pension fund members and employers. And finally, it should not inflate the administrative costs of Pensionskassen any further.

Heinz B. Rothacher, CEO
Complementa Investment-Controlling

heinz b rothacher

The two referenda on 24 September were complex. It was difficult for voters to understand the details of the old-age reform and the planned increase of VAT. Moreover, the combination of the first and second pillar – the state pension and the private pension system – was not well received since many Swiss consider them to constitute two separate issues that have to be treated individually. The fact that the Swiss society is ageing is well accepted; nevertheless opinions diverge about how to tackle the related problems. An approval of the second referendum concerning the pension schemes would have brought some relief to pension funds under pressure due to the low interest rates. However, it would not have changed the fact that there is still a heavy financial burden on the younger generation. Many of them therefore rejected the proposed reform, as did women, who would need to have worked longer. The foundation of the system – solidarity between young and old – will have to be reviewed. It remains to be seen if a better solution with separate referenda can be found soon. It is clear that we all will have to work longer to finance the growing deficit in our pension schemes.

Alain Berset, federal councillor, head of the Federal Department of Home Affairs with responsibility for social affairs and retirement (Social Democrat). Author of the AV2020 reform package 

alain berset

We are accepting the rejection. This is not a personal defeat. But over the last six years we have put a lot of work into it. It has taken up quite a lot of time. It is true, that the topic is very complex but this is because the pension system has to accommodate all situations of the whole working population. In a direct democracy we have to be able to explain this complexity. The need for a reform is undisputed. We have worked on a solution for six years and now we have to continue work to find a solution. I have decided it is necessary to see and hear all stakeholders – including the opponents – to find out what needs to happen next. There has not been a reform for 20 years. The AHV has been blocked for some time and the situation is slowly getting uncomfortable. Almost everybody agrees that a solution has to be found.

From a television interview on the evening of the vote

Jürg Walter, managing director

It remains undisputed that measures have to be taken in the foreseeable future to secure the financing of the pension system. Independent of the outcome of the referendum, an adjustment of the conversion rate and other important actuarial measures to the current low interest rate environment and the rising longevity assumptions should be considered.

Jörg Odermatt, CEO
PensExpert AG 

joerg odermatt

The Altersvorsorge 2020  was too complicated and too intransparent for the people. A ‘no’ at the polls was therefore expected. For the young this is good news. They and the following generations would have had to pay for this reform. Despite the no vote on Sunday the people are open for urgently necessary reform steps.

Hansruedi Scherer, partner

hansruedi scherer

The AV2020 reform would certainly have eased the situation somewhat due to the lower conversion rate, and would have reduced the pressure on the redistribution component of the pension system. However, the trade-off for this improvement would have been disadvantages in other areas, including administrative complexity and further reforms being blocked for many years. The need for action has grown since discussions on these reforms began, and AV2020 would not have solved the problems. Pension funds will therefore mostly either be moderately happy or moderately unhappy about the referendum result. It is still to be hoped that politicians will soon deal with the critical components to this reform. However, according to press reports, it looks likely that a solution for the second pillar will only be sought once a reform package for the first pillar has been crafted. The need for reform in the second pillar appears, as before, to be underestimated. Without decisive and timely action it is to be feared that individual pension funds or foundations with few to no liabilities for benefits above the legal minimum will disappear from the market. We do not expect any direct implications for investments. 

André Tapernoux, wealth leader
Mercer Switzerland

andre tapernoux

After the comprehensive pension reform has been rejected, it is important to stress that reforms for the first and second pillars will still be necessary and urgent. On a positive note, the politically proposed coupling of the two pillars has lost momentum due to the rejection, which opens up opportunities for individual reforms of each of these two pillars. Challenges to pension funds remain as life expectancy will continue to rise and financial stability is a top priority. Thus, benefit and contribution levels as well as optimal investments must be assessed.

Swiss Trade Union Association

Many of today’s pensioners find it difficult to make ends meet with their pension. They followed the argument of the opponents [of the AV2020 reform] that – in contrast to new retirees – they would not get an AHV top up. Mainly women voted ‘no’ because they could not accept an increase to their retirement age. Particularly as women are earning less than men and the problems of older employees remain unsolved. Additionally there was protest against the cut in payments by Pensionskassen. The no to Altersvorsorge 2020 shows important socio-political arguments played a significant role in the rejection. These problems have to be solved. This means the so-called ‘plan B’ suggested by employers is already doomed to fail. It does not solve a single one of these problems and employees would have to pay very dearly for it. For the unions it is clear – anyone receiving in a pension in Switzerland has to be able to live on it. Therefore the unions will continue to fight for a good AHV pension and a good retirement provision. A cut in payments is unacceptable. And the problems of older employees have to be solved. For women we need effective instruments to implement pay equality.

Swiss Insurance Association

The Altersvorsorge 2020 reform rejected by the Swiss voters included different measures for a temporary financial stabilisation of retirement provision. Among them was the alignment of the statutory retirement age for women and men to 65 years, the increase of the VAT by 0.6% and the lowering of the conversion rate to 6%. The SVV views these measures as indispensible. Therefore, they have to be reintroduced and pushed for as soon as possible. But a temporary stabilisation of retirement provision is not enough. The payout levels have to be secured over the long term. Demographic change also makes a debate on the flexibilisation of the retirement age indispensible. For a flexibilisation effective incentives have to be put in place. Further, the AHV as well as the occupational pension system have to be rendered sustainable with separate measures. 

Peter Zanella, actuary
Willis Towers Watson Switzerland

peter zanella

In fact, I am very pleased and positively surprised that this badly designed package was finally rejected by the Swiss people. I think that in the final couple of crucial weeks voters realised that there were too many pitfalls and unwanted new and complicated regulations, that not even experts ultimately recognised in some cases. Finally, they also realised that it in fact corresponded to a substantial increase in social security benefits that would soon require additional funding, even though the government presented all as a sustainable package. I am proud of the reasonableness of my compatriots and that they did not give in to the pessimistic scenarios of some high-ranking officials. On the other hand, now is the time for action and a renewed transparent slimmed down proposal that will tackle the real urgent essential issues: 

• A decrease in the conversion rate in the second pillar with reasonable compensation measures without complicated and costly grandfathering regulations over many years;

• Equal flexible retirement age that reflects economic and demographically realities;

• An adjustment or  increase of funding for the AHV; 

• All in all, no unnecessary further regulations that only lead to higher cost without benefit for members. I am confident that the Swiss people will ultimately vote for a simple, transparent new regulation in time if they feel it is justified and will contribute to a sustainable future retirement system.

Peter Wirth, publisher

Disappointment among the supporters of the AV2020; relief among the opponents, but hardly any enthusiasm. Everybody knows how delicate a fresh start is. But this is not due to the nature of the subject; rather due to the political constellation. In principle the problems to be solved are simple. In the second pillar the conversion rate has to be lowered. This is only a problem because the parliament – against all reason – is insisting on it being set down in the law. In the AHV [social security] the contributions have to be increased and/or the payments lowered. Otherwise it will be broke in a few years. All this is undisputed. And all this could be decided in two sessions by a parliament worth its money – on the condition that the questions are taken on pragmatically and not elevated to a religious confession of faith. The Social Democratic Party (SP) and the Christian Democratic People’s Party (CVP) paid the price for stubbornly pushing through their views.