SWITZERLAND – The Swiss Federal Council, the Bundesrat, has decided to lower the minimum guaranteed interest rate on pensions to 2.25% from 3.25% as of January 1 2004.

It had been widely expected that the rate, which was lowered to 3.25% from four percent in January this year, would be kept on hold. The decision to cut the rate was based on findings from Complementa Investment Controlling and AWP Sozial Sicherheit.

In a statement, the Federal Office for Social Security, BSV, said that the studies by the two organisations revealed an increase in the number of underfunded Pensionskasse from 45% to 60% over the first three months of 2003.

This figure has since fallen back to 40% thanks to market improvements, and now almost 20% of Pensionskasse are more than 100% funded. However, the BSV says the extreme volatility of the financial markets means that there is still a risk of a reversal, making it necessary for the rate to be reduced.

The recent market revival, however, meant it was unnecessary to lower the rate to as low as the two percent which had originally been mooted by the BVG-Kommission, or occupational pension commission.

There has still been no decision on the reduction of the conversion rate which is causing concern among employers and unions. At present, the BVG-Kommission has said that the rate will be lowered from 7.2% to 6.8% over the next ten years, but has agreed to now review both the timing and lowering of the rate.

The house of representatives has decided to question the government over the decision by Winterthur and other insurers to lower this rate to 5.835% for men and 5.454% for women, regardless of the reduction stated by the BVG-Kommission.