SWITZERLAND – Despite a difference of opinion between social partners and government commissions, the Swiss federal council has decided to raise the minimum guaranteed interest rate for occupational pensions to 2.5% from 2.25%

The decision follows a string of proposals on how to handle the issue of the minimum interest guarantee, which was lowered from four percent to 3.25% in January 2003 and was then slashed a year later to 2.25%. The issue has created some controversy in Switzerland.

According to a statement from the Swiss internal ministry, the change will occur from January 1 and was prompted by the improvement in financial markets and the financial situation of retirement institutions.

“The minimal interest rate must be applied to the retirement assets of old concerned with obligatory occupational pensions,” it said.

The social partners and the social security and public health commissions had taken “different positions” when consulted on the issue, the release said. They had proposed rates between 2.25% and 2.75%.

At a meeting on May 13, the federal commission for occupational pensions had decided, by eight votes to six, to recommend that the council keep the rate at 2.25 %. At the time it cited the financial standing of many pension institutions.

The Commission made a subsidiary proposal recommending that even if the rate were modified then a ceiling of 2.5% should not be exceeded.