SWITZERLAND - The upper house of the Swiss parliament, the Staenderat, has decided that pension funds can ignore the minimum interest rate guarantee of 2.25% for a maximum of five years.

The decision, by three votes, comes amid fears that a “two-class second-pillar” might arise as a consequence.

“There are now differences at which the Nationalrat lower_house must have a good look at,” said the Vorsorgeforum, the internet forum of the Berufliche Vorsorge der Sweitz, an association of pension funds, experts, the pension fund association ASIP, banks and insurance associations.

The suspension of the 2.25% interest rate would be allowed to last up to a maximum of five years and is allowed only when a fund needs restructuring.

During the debate interior minister Pascal Couchepin said: “This law would allow pension funds to go back to a healthy state. It is good, it is necessary.”

He added: “It is an important arrangement, it constitutes a possibility for the funds to have, for a certain period a certain protection.”

“The minimum interest rate is currently fixed with attention to the market and the pension funds’ situation.”

Couchepin said: “It is forecast that from 2005 onwards we must fix the minimal interest rates solely in function of the market. Consequently we can no longer consider the situation of the pension funds.”

The first step expected of pension funds in trouble would be to increase the contribution rate paid by employers and employees. Pensioners would also be “asked to make a sacrifice,” according to Swiss daily the Neue Zuercher Zeitung.

The new plan, to be introduced from August 1, would be adopted only if such preventive measures did not work.

The bill will soon go back to the Nationalrat.

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