The Council of States (Ständerat) – the upper house of the Swiss parliament – has voted in favour of a new model defining the thresholds to join Pensionskassen, a decision that is part of a wider reform of the country’s second pillar pension system.

The parliament’s upper house has decided last week that 15% of the salary subject to the first pillar AHV should be calculated as a deduction – Koordinationsabzug – for the mandatory part of the second pillar system, in order to define the threshold to join a Pensionskasse.

The amount is deducted from the gross annual salary in the second pillar system.

The deduction is set to avoid double memberships in first and second pillars, splitting the amount of wages insured under each pillar. It is under current rules fixed at just under CHF25,100 (€25,376), with a high amount meaning that low-earning employees, or those who work for several employers, are not able to insure their income, or only marginally, in a pension fund, therefore not saving retirement benefits for old age.

The National Council, the lower house of parliament, would prefer to have a fixed deduction, as before, but halving it from a little over CHF25,000 to around CHF12,500.

According to Damian Müller of political party FDP (The Liberals), cutting the fixed deduction to around CHF12,500 would have represented administratively the simpler solution.

The Council of States wanted to keep the promise to support low-earners and part-time workers, particularly women, in order improve their prospects for pensions, especially after the narrow majority voting in favour of the reform of the first pillar AHV in a referendum earlier this year.

To potentially increase the number of people with low wages registered in pension funds, the Council of States has also decided last week that payments to Pensionskassen can be made starting from a minimum annual income of CHF17,200, therefore lowering the current threshold of close to CHF21,500.

The National Council proposes a threshold of CHF12,548.

Under the model proposed by the National Council, the reduction to CHF12,548 would add 460,000 people as new members in the second pillar system, while lowering the threshold to CHF17,208 would add 200,000 new members, Erich Ettlin, member of The Centre (Die Mitte) party, said during parliamentary discussions.

Unlike the National Council, the Council of States wants to leave the age to start saving for retirement untouched at 25 years old, instead of reducing it to 20 years old.

The Council of States has not taken any decision on compensations for people caught in the reform of the second pillar system for the reduction of the conversion rate that is used to calculate pension pay-outs.

The second pillar reform foresees a reduction of the conversion rate from the current 6.8% to 6%.

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