The Swiss Federal Law on Occupational Benefits (LOB) came into force on 1 January 1985. It sets out minimum standards for the financing of second pillar benefits through occupational benefit schemes established in public or private law (over 10,000 such schemes exist). They stipulate, in particular, the minimum pension credit rates, the technical rate of interest to be credited to retirement pension accounts and the capital-pension annuity conversion rate.
The revision of this law was already planned when the LOB entered into force. However, the Federal Council did not open the consultation procedure on a preliminary draft revised text until 1998. Unanimous agreement was not reached on the various revised points proposed in this preliminary draft; the draft text which was finally published in March 2000 only contains a few of these provisions. The most important of them are described below.
The draft revised text of the LOB does not focus on the development of the 2nd pillar but on the consolidation of the system in two respects. Firstly, this revision aims to introduce an identical retirement age for men and women and more flexible pension arrangements; secondly, it seeks to guarantee maintenance of the present level of occupational benefits and to permit their improvement in certain areas.
The LOB currently stipulates a different retirement age for men (65) and women (62). As in the case of the AVS, the revised version of the LOB provides for a phased increase in the retirement age for women to 65. The occupational benefit schemes will be required to offer insured persons the possibility of taking early retirement from age 62 onwards. The insured person will then draw reduced benefits.
The intention is to adapt the conversion rate (pension capital) of 7.2% to take account of longer life expectancy. The new rate of 6.65% proposed in the draft revised text is currently the subject of some controversy. Following the publication of the new mortality tables by the Federal Fund (EVK 2000), which show a reduction in the life expectancy of women, political circles are questioning the reduction of the conversion rate. To provide for a smaller reduction in retirement benefits resulting from the lower conversion rate, the draft revision proposes that the pension credits be adjusted (between 0% and 3% depending on the age bracket).
At present, provision is only made for a widow’s pension in the event of death of the spouse. Since one purpose of the two revisions currently in progress (11th revision of AVS and 1st revision of LOB) is the introduction of equal treatment for men and women, the draft revision naturally makes provision for the introduction of a widower’s pension.
Sonja Vonlanthen is a pension fund expert and chairman of the board of Givisiez based Vonlanthen Consulting in Switzerland, part of MGAC network