The Swiss government is set to examine how the lowering of the pension fund conversion rate will impact future retirement income, tendering for firms to conduct a survey on the issue alongside research on the impact of changes to the international accounting standards.
As part of its ’Altersvorsorge 2020’ reform proposals, the Swiss government has proposed to lower the minimum conversion rate from the current 6.8% to 6% to ensure long-term sustainability of the second pillar.
At the time, the proposal was welcomed by many industry representatives. During the consultation phase for the draft legislation, only the Swiss actuarial society expressed concern that the 6% rate remained too high.
The government is convinced that an adjustment to 6% will ensure no transfer of money from active members to retirees, with the study tasked with establishing the effects and losses for pensioners from a cut in the conversion rate.
The tender for the study specifies that the final report on the findings has to be issued by the end of November, ahead of the Swiss parliament being presented with the draft legislation for the ’Altersvorsorge 2020’ reform by year end.
The legislation will also include proposals on how to best compensate future pensioners for the negative effects from the cut in the conversion rate, scheduled to occur gradually once the reform is implemented.
Simultaneously, the Swiss government is also tendering a study into how IAS 19 affects Swiss pension plans. The study will place a particular emphasis on companies which have abandoned the international standard in favour of Swiss GAAP FER.
Based on a pool of companies, the studywill also look into how the revision of IAS19 in 2013 affected pension plans and whether any adjustments were made.
According to the tender possible changes to the pension plans could have included a switch from DB to DC, introduction of life-cycle style choices known as “1e”-plans, additional financial payments from sponsors, de-risking or a different risk management approach.
The final report on the findings is to be presented by the end of November.