SWITZERLAND - The Swiss government has set in train one of the most far-reaching reviews of the country’s occupational retirement sector in response to public criticisms that the long-term health of the Swiss retirement system may be in serious danger.
The announcement follows hard on the heels of the decision by the Swiss Federal Council last year to decrease the BVG/LPP (Swiss retirement savings law) minimum guarantee interest rate for occupational pension plans from 4% to 3.25%. The change took effect from January 1 this year.
The pressure for last year’s reform came from insurance companies finding it increasingly difficult to deliver on the previous 4% guaranteed rate. The insurers had been hoping for an even lower minimum rate than 3.25%. Labour unions had resisted the change on the grounds that it would lead to a reduction in benefits for employees.
The new emergency review called by the government reflects even greater concerns about minimal interest rate levels and occupational pension fund security in light of the prolonged fall in equity markets.
This has led to grave concerns about the financial health of the country’s leading insurance companies, an issue that is worrying a large part of the population, the government says.
In a bid to assuage public concern, the government is implementing a reform programme to analyse and correct the weak points of the Swiss second pillar.
The government says the emergency programme has three main strands: structural revision, financial stability and the implementation of the first revision of the LPP law.
As part of the programme, the Swiss authorities say they will focus on optimising surveillance of pension funds as well as creating a new legal framework better suited to the objectives of the LPP.
Additionally, the government will examine the position of the life insurers in occupational retirement provision and highlight any need for action at the legal level to guarantee the LPP introduction.
Furthermore, the government will elaborate on its decision to introduce free choice for pension funds by the end of 2005.
Two expert commissions and an interdepartmental working group have been set up to carry out the work.
The following measures are expected:
* By spring 2003 a supplementary report on the first revision of the LPP law concerning the financial health of Swiss pension funds.
* By September 2003, a study on the short and medium term risks relative to the financing of pension funds and savings institutions.
* By October 2003 – a re-examination of Swiss minimum interest rate guarantees.
* By December 2003, a report from The Swiss Federal Council on the financial situation of Swiss retirement savings institutions.