The debate over Switzerland’s reform plans, Altersvorsorge 2020, look set to continue after Asip, the Swiss pension fund association, approved the government’s plans to lower the conversion rate just days into the consultation phase.

Asip agreed that the conversion rate – used to calculate pension payouts from accrued assets – should be cut from 6.8% to 6% in the second pillar, yet Swiss actuaries still consider this level to be too high.

In a statement, the Swiss actuarial society SAV said “a rate of 5.6% at the most is justifiable”.

The SAV cites the country’s largest pension fund Publica, which is to lower its conversion rate to 5.65% from 2015, similar to other pension funds managing above-mandatory contributions.

The actuarial society also warned that the compensatory measures suggested to soften the blow of the cut to the conversion rate would lead to “massive increases” in benefits for some people and thereby generate “considerably higher costs”.

According to the reform plans, the rate by which salaries are discounted to calculate contributions into the second pillar is to be slashed.

This rate – the Koordinationsabzug – is used to coordinate expected payments from the first pillar and those from the second pillar to make up 60% of the final salary before retirement.

The Swiss pensions industry has been debating for several years now whether a higher compensation rate might be fairer for lower incomes.

However, according to calculations by the SAV, slashing the Koordinationsabzug could increase costs in the second pillar by up to 50%.

Asip, on the other hand, has welcomed the reform proposal as a much-needed improvement for people on lower incomes.

To simplify calculations, the pension fund association suggested doing away with the Koordinationsabzug altogether and instead capping payouts from the second pillar at a certain maximum.

One reform proposal Asip has challenged is changing the mode in which the second-pillar minimum interest rate is calculated.

Currently, the minimum rate is set at the end of a given year for the next year based on bond returns.

The government wants to change this to an ex-post calculation based on actual returns in pension fund portfolios for the year in which the minimum rate had to be achieved.

However, Asip said this change did “not bring any added value” for pension funds and their members, and argued that Pensionskassen needed to know “the rules of the game” in advance.