SWITZERLAND - In the proposed law for the recovery of Swiss occupational pension funds, an under-funded scheme would be allowed to ignore the minimum interest rate, to reduce pension payments and to raise additional contributions. However, leading players at second pillar level do not agree who should pay the bill.

ASIP, the Swiss Pension Fund Association, welcomes in general the proposed measures including the most controversial reduction of current pensions. As Gregor Ruh, head of ASIP says all members of a scheme should contribute equally to the recovery of under-funded schemes.

ASIP also welcomes the proposal that active members and employers will have to pay special contributions dedicated for the recovery, and through a reduction of pensions. The proposed measures should be sufficient if returns in the financial markets will find their way back to a more normal level in future, says Ruh.

Not surpringsingly, trade unions are opposing reductions of benefits, says Colette Nova of the Schweizerischer Gewerkschaft (SGB). Because pensioners have no opportunity to compensate for lower incomes, unions will generally refuse any attempts to shrink pensions.

“In addition, the minimum interest rate has already been lowered too much, so that we find it hard to accept that under-funded schemes would be allowed to pay less than minimum interest”, says Nova. On the other hand, the unions welcome all incentives for employers to contribute for additional amounts.

Such approaches are real burden on employers. “With additional contributions, employers will become guarantors of pension funds”, said Hans Rudolf Schuppisser of employers association Schweizerische Arbeitgeberverband.

Such a role would be inconsistent with the principle of parity in the second pillar. Instead of additional contributions, employers prefer that claims of the members are reduced. In general, Schuppisser believes that the discussion about under-funded schemes got a “psychotic dimension”.

“A panic broke out”, says Werner Nussbaum of Innovation Zweite Säule. He misses “the wisdom of principles” in the proposed law for recovery and believes that problems of under-funded schemes could also be resolved within the existing laws.

Nussbaum argues also that “a dictatorial fixation of the mimimum rate of interest by the government is cutting apart law and reality. The fact that underfunded schemes will be allowed to undercut the given rate, also shows that a general interest rate cannot be sustained anymore.” He believes that pension schemes should be given the chance of fixing the interest by themselves, in accordance with their liabilities.