The Swiss Federal Council faces a tough decision on whether to hand over its full proposal for the second pillar pension system reform after consultations given the political sensitivity of the matter.

“The decision of the Federal Council is not easy because there isn’t a large and clear majority that supports the proposal for the reform, and the outcome is not certain at the moment,” Colette Nova, vice director of the Federal Social Insurance Office, the department responsible for occupational pensions, told IPE.

The Federal Council is likely to take some time to examine the results of the consultation.

She said the Council had different options: it could pass on the proposal for a reform as it is to the parliament, it could change it, and if the changes were considerable, the Council then would carry out another consultation.

She added that proposing alternatives to a certain model of the reform was also an option, but it would require a new round of consultations too.

The review of the second pillar pension system is based on proposals made by the social partners Swiss Employers’ Association (SAV), Swiss Trade Union Federation (SGB) and Travail.Suisse, with the goal to reduce occupational pensions’ funding problem, secure a certain level of pensions payments and to improve social security for low-income workers.

The coronavirus pandemic has forced an extension of the consultation until the end of May.

Hanspeter Konrad, managing director of Swiss pension fund association ASIP, told IPE that it remains to be seen whether the Federal Council will stick to the social partner compromise.

“The proposed pension supplement in particular has been massively criticized and largely rejected in the consultation process,” he said, adding that also in a following debate in Parliament the result will still be uncertain.

“The proposed pension supplement in particular has been massively criticized and largely rejected in the consultation process”

Hanspeter Konrad, managing director of Swiss pension fund association ASIP

“However, we assume that in the political discussion our demand for an affordable reform without unnecessary correction to benefits will become more and more important due to the recession,” he added.

Roland Müller, managing director of the employers association Schweizerische Arbeitgeberverband, agreed that it was not yet clear “what the message of the Federal Council will look like, and when it will pass it on to the Parliament,” he told IPE.

But the Swiss Employers’ Association (SAV) is confident that the Federal Council will “considerably” rely on the proposal made by the social partners.

The compromise can be accepted as a “comprehensive package,” he said.

Müller underlined that the urgency of a complete reform is undisputed among the political parties, therefore the employers association believes that the Parliament will take on its responsibilities to modernize the second pillar and solve important structural problems.

He added: “The introduction of a pension supplement reinforces and stabilizes the second pillar. Only for the first 15 years the transitional generation receives a lifelong fixed pension supplement financed by 0.5% of wages.

“After that, from the 16th year since the reform came into force, the pension supplement is based on funds available, and it is important for us to emphasize that the funding is permanently limited for a specific purpose to 0.5%.”

According to the social partners, beneficiaries will receive a lifelong monthly pension supplement that varies from CHF200 (€180) to CHF100, independent from the amount of the pension fund, and financed through a contribution of 0.5% on the annual income bound to the first pillar AHV up to CHF853,200 (as of 2019).

For Konrad, the solution of a lifelong pension increase through a supplement is not “justifiable” in light of the economic impact caused by the COVID-19 pandemic.

ASIP puts a rapid reduction of the conversion rate from 6.8% to 5.8% at the top of the reform list.

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