The Swiss government has come out against the idea of free choice in the occupational, or second-pillar, pensions arena.
“The Federal Council estimates that free choice currently does not constitute a desirable evolution of the second pillar,” the government said. It comes after two reports which looked at the pros and cons of free choice.
The council said individualisation “would weaken the system and the relationship between benefits and their cost”. The LPP federal commission had already decided unanimously against free choice.
Pittet Associates and J-A Schneider had looked at the case against free choice while econcept/Ecofin were on the pro side. They looked at three separate models.
The first was a completely free choice where there was no link at all with the employer. The second was partial freedom in choosing additional cover. The third was free choice within an existing additional scheme.
Econcept/Ecofin looked at a fourth idea, of collective risk insurance along with a free choice of old-age savings.
But the Federal Council says that only the third model, of partial free choice, constituted a possible evolution of the Swiss pensions scheme. The stability of the system and its efficiency, namely the relationship between services and costs, rested “primarily on the principle of the community”.
An increase of individualisation would weaken the system and lead to a higher cost for the state.
Meanwhile, the Swiss federal council has also announced steps to strengthen occupational pensions supervision following an expert report. It will supervise on a canton or regional basis and create an independent commission charged with overseeing the area.
The federal department of the interior was charged with working out a draft amendment of the law on this subject, which go to consultation this summer. The regional monitoring already exists in central Switzerland and will be expanded into the east of the country.
This model makes it possible to maintain the monitoring of the pension institutions at the canton level, while increasing the requirements, the government said.
And it said that a new regulation is also planned for overall oversight. It said: “This must ensure the coordination and the standardisation of the monitoring principles by working out standards and directives.”
An independent commission, with a secretariat attached to OFAS, is envisaged. This would guarantee coordination between legislation and supervision.