SWITZERLAND – The Swiss federal council has rejected demands by the Federal Office for Social Security to re-examine Winterthur’s new second pillar model.

Winterthur, the life insurance subsidiary of Credit Suisse, recently announced plans to reduce its rate at which it converts occupational scheme members’ capital into annuity from 7.2% to 5.835% for males aged 65, and 5.454% for females aged 62. The new model is said to be able to cope better with an ageing population and rising costs.

Such moves would result in pensioners seeing a cut of up to 33% of their pensions say critics (although Winterthur argues that losses would be minimalised to 10%).

Unions have been outraged by Winterthur’s decision – aggravated further by other Swiss insurers jumping on the bandwagon – and had hoped that the model would be re-examined and, therefore, delayed.

The rejection by the Swiss federal council comes as a blow to the unions.

There is one chance remaining, however. In July, the Schutzgemeinschaft fuer KMU (the association of the protection of small and medium-sized enterprises) complained to the Federal appeals commission for the supervision of private insurance.

The association hopes the commission will delay the introduction of the lower conversion rates and higher tariffs to January 2005 rather than January 2004. The commission has yet to reach a decision.