SWITZERLAND – The Federal Council has begun the third phase of the reform to the second pillar BVG scheme with a consultation on a clampdown on loopholes that favour richer insured people.
Cantons, political parties, trade unions and employers can express their view on the draft until March 15.
The planned changes are also meant to introduce more flexibility to the system. They are expected to be passed before the end of the summer session and implemented next year.
The Federal Council has envisaged a clearer differentiation between second pillar plans, which enjoy tax-advantages, and private plans. This distinction should avoid loopholes that lead “privileged insured” to “over-insurance” and tax optimisation.
According to a press release put out by the internal ministry, the planned new rules would mean that richer people would not be granted “excessive fiscal advantages thanks to the generous pension system”.
It has also suggested “special-case rules” to limit the amount of contributions first-time insured foreign workers can pay to the BVG.
“This has been thought for workers who have already pensions abroad and pay contributions to the second pillar, which are little taxed, and then leave taking the money,” explained Jürg Brechbühl, vice director of the federal office for social security contributions.
Swiss self-employed workers without BVG cover but with a third pillar insurance, which also offers tax advantages, would be required to pay an amount in the second pillar as well. A self-employed worker can pay up to CHF30,000 (€19,300) to third pillar plans, while an employee up to CHF6,000.
Pension funds, on the other hand, would be allowed to offer up to three pension options, to improve flexibility and respond “to need and opportunity”.
The proposal also includes plans to tackle early retirement. Pension funds would be required not to pay benefits until the member’s 60 birthday.
The first round of reforms to the BVG, aiming at a higher degree of transparency, have been implemented in April 2004.
The second batch has been implemented this January with a reduction of the minimum wages to access the second pillar from CHF25,320 to CHF19,350. It has been estimated that the measure will enable up to 100,000 new workers, mainly women, to qualify for the BVG.
The second phase also includes guidelines for pension funds with a coverage ratio under 100%, which include a temporary reduction of up to 0.5% in the minimum interest rate, 2.5%.