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IPE special report May 2018

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Swiss second-pillar revamp strains budget

SWIZERLAND - The cost of reorganising Switzerland’s second-pillar occupational pension schemes is threatening to break the country’s budgetary limits.

The finance committee of the Council of States is now recommending that the 1.1 billion Swiss franc (712 million-euro) cost be defined as an extraordinary payment to prevent it breaching the limits of the “debt brake” (schuldenbremse), Switzerland’s self-imposed budgetary cap.

It wants the upper limit of the debt brake to be temporarily increased by 4.1 billion francs. Three billion francs is an extension of the reduction of the structural deficit, and 1.1 billion francs is an extraordinary payment for the reorganisation of compulsory occupational pension funds.

The cost covers government plans to introduce new statutes in 2004 to lower the minimum guarantee rate to zero if necessary and raise employers’ and employees’ contribution levels.

Hans-Rudolf Merz, president of the finance committee, said it that the budget estimate proposed by parliament on September 26 could stay within the rules of the programme only if the structural deficit was extended by three billion francs and the 1.1 billion-franc pension fund reorganisation costs were defined as an extraordinary one-off payment.

The debt brake was introduced in November 2001 when the structural deficit was larger than expected. The aim was to avoid the structural deficits of the past and to balance the budget over the economic cycle.

Under the rules of the debt brake, the Swiss Federation’s expenditure may not exceed its income. The rules do not require annual reconciliation of the two, however, but are applied over an economic cycle, which extends over several years. A key feature, however, is an upper spending limit which may not be breached.

Hans Schiffmann, secretary to the finance committee, said: “The debt brake has clear limits that and clear amounts that could not be exceeded. So we had to find a legal means to remain under this limit.”

The committee’s proposals has been accepted by the government. A law must now be passed by both houses of parliament to give them force.



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