SWITZERLAND - Unions in Switzerland have vowed to organise a national referendum on planned reductions in pension if the Swiss parliament approves those cuts.

Last November, the government approved a cut in the annuity rate of conversion for occupational pension benefits to 6.4% in 2011 from a bit more than 7% now.

The government said the cut was necessary amid longer life spans for retirees and dwindling capital market returns. Hence, workers with CHF100,000 (€61,000) in accrued pension savings would from 2011 get an annual benefit of CHF6,400.

If that happens, Unia, a union representing service-sector employees, says it would organise a national referendum in league with the Swiss Union Federation (SGB). The benefit cuts would then only take effect if a majority of the Swiss populace sanctioned the move.

"In the past two years, Swiss Pensionskassen had returns  - 12.6% in 2005 and 6.6% in 2006 - that are well above what the government had assumed. There is therefore no justification for cutting benefits," Unia said.

"A reduction in the rate of conversion would only serve the profit motives of the insurance industry and their shareholders, and do so at the expense of workers," it added.

Unia spokesman Nico Lutz said that if a referendum were held, he didn't expect it before next year. "The parliamentary process will probably drag on until the rest of the year."

For their part, Swiss insurers have already complained that the planned cut in the rate of conversion does not go far enough.

"The reduction will not suffice to halt the hidden redistribution of income from working people to retirees and to put the second pillar on a solid foundation," said Swiss insurance lobby SVV. SVV favours a reduction in the rate of conversion to 6%.

More controversially, Swiss Pensionskassen lobby, ASIP this month proposed doing away with the rate of conversion completely. In its place, ASIP suggests crediting workers' pension savings with a interest rate equal to 8% of salary each year.

Benefits would, furthermore, be calculated according to the life expectancy of workers, ASIP says.