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Swiss employers lament 'mammoth' one-off pensions reform

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Swiss employers have urged the government to break up the pensions reform package Altersvorsorge 2020 into more “digestible” pieces.

Earlier this year, the Swiss government unveiled comprehensive plans for a joint reform of the first and second pillars of the country’s retirement provision.

However, Swiss employers argue that the government bit off more than it could chew and risked an “overload” and a “total crash” of the system.

The employer federation SAV was particularly critical of the planned value added tax (VAT) increase of up to 200 basis points to allow an injection of cash into the first pillar.

Instead of what it called a “mammoth” reform proposal, it urged the government to break up the draft into “more digestible” pieces and prioritise topics.

The Swiss pensions association ASIP previously warned against such an approach, saying that elements of the reform package should not be cherry-picked.

But the SAV argued that there would always be uncertainty in pensions provision, and that it therefore made “little sense to want to cover all possible developments over the next 20 years in one go”.

Raising the VAT could only be a “measure of last resort” and would have to be linked to an increase of the statutory retirement age, it said.

For the second pillar, it welcomed the government’s proposal to lower the minimum conversion rate to 6% but stressed the measure needed compensatory payments to keep the current pension payout level.

In fact, 2012 data now published by BFS, the federal statistics bureau, confirmed that Swiss pension funds significantly increased their buffers last year – some doing so to compensate members for lowering technical parameters, such as the conversion rate or the discount rate.

Collective scheme Profond was the latest to implement such changes, recently announcing its decision to lower the conversion rate from 2014 by 10bps annually, eventually lowering it from 7.2% to 6.8%.

According to BFS figures, CHF35.5bn (€29bn) went into buffers at Pensionskassen in 2012, an increase of more than 80% compared to the previous year.

In total, pension assets in the Swiss second pillar increased to CHF672.6bn, 7.6% above 2011 levels.

Another measure suggested in the Altersvorsorge 2020 reform package was to set the minimum interest rate in the second pillar at the end of the year rather than a priori.

But, for 2014, the rate has now been slightly increased from 1.5% to 1.75% by the government, which once again followed the advice of the BVG commission.

Read more about the plans regarding Altersvorsorge 2020, as well as other Swiss topics, in IPE’s December issue

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