SWITZERLAND – The Swiss government has proposed greater cuts in the rate of conversion for occupational pensions amid dwindling long-term market returns and an increase in pensioners’ life expectancy.
Under current law, the rate of conversion for corporate pensions is to fall to 6.8% by 2014. This means that by 2014 the annual benefit for a retired Swiss worker with CHF100,000 (€63,8700) in accrued savings would total CHF6,800.
But under the new proposal from the Social Security Agency, the rate of conversion would be reduced more rapidly, falling to 6.4% by 2011.
The present rate of conversion is 7.1% for male employees and 7.2% for female employees.
In unveiling the new plans, the government is following the recommendations of the BVG-Kommission, a committee that advises it on corporate pensions. It comprises officials from employers’ groups, trade unions and Pensionskassen.
Despite the benefit cuts, the government insisted that a combination of the state and corporate pension would give future retirees up to 60% of their former salary for the remainder of their life.
But Switzerland’s main trade union confederation, the SGB, dismissed this claim, noting that low-income workers would be hardest hit by the cuts. It urged the government to cushion the financial blow of the changes.
The proposed benefit cuts must be approved by the parliament to come into effect.
The Social Security Agency proposal came a week after the BVG-Kommission said the guaranteed rate of return on pension contributions should be left at 2.5%.
Pensionskassen association ASIP has previously urged the government to reduce the guaranteed return to 2%. It said the cut was necessary in part to enable the Pensionskassen to rebuild their reserves.
The equity crash of 2001-2003 hit the reserves of many Pensionskassen, particularly public schemes, leaving them chronically underfunded.