SWITZERLAND – The Swiss government has signalled that it may reconsider its decision to cut the minimum interest rate guarantee on pensions to two percent.
A decision is due to finalised next month about whether the rate, which covers mandatory pension accruals, is to be lowered to two percent from the start of next year. The current rate is 3.25%, which was itself lowered from four percent previously at the start of this year. Observers say the government may choose a 2.5% rate next year.
“Everything is still open,” interior affairs ministry spokesman Jean-Marc Crevoisier was quoted as saying by Bloomberg News in an interview. “It's clear that equity markets have recovered in recent months, and the government will take this into account.”
The comments follow an improvement in returns at Swiss pension funds. The median return for Swiss pension funds in the first half of the year was +4.5%, according to Watson Wyatt and Swiss Pension Fund Association ASIP. In 2002 Swiss pension fund returned –10.3%.
The improved performance had prompted the Swiss department of social affairs to reconsider lowering the minimum interest rate guarantee.
The criteria for determining the minimum interest rate are based on returns of 10-year Swiss government bonds and returns on investments.