Swiss pension reform in 2022 continues to be discussed by the government and the goal is to reduce the conversion rate from 6.80% to 6.00%. This would mean a lower annual pension for upcoming retirees. What’s under debate is how to not lower payments at the age of retirement compared to today’s level and how should the transitional generation be compensated.
The reform therefore may have the following impact:
- Reduction of the conversion rate from 6.80% to 6.00%
- Lower the deduction of coordination so that a higher salary is insured
- Change savings contributions towards a more age-independent model
- Start the savings process earlier at age 20 rather than 25
- Compensate the transitional generation with a pension supplement
- Finance the compensation either through a pay-as-you-go system or a capital cover system
The Swiss population will likely vote on the final bill next year, meaning a reform may come into force in 2024 at the earliest. If approved by the people, corporate pension fund solutions will be necessary for many companies.
Background and Context
Swiss federal law on compulsory occupational retirement, survivors’ and disability pension (BVG) came into force in 1985, and the conversion rate was set by the federal council at 7.2%. The conversion rate defines the percentage at which the retirement capital is converted into a lifelong pension. In the first pension revision in 2005, the conversion rate was reduced stepwise from 7.20% to 6.80%. Since 2005 all attempts to adjust the conversion rate to the current environment (higher life expectancy and changed interest environment) failed.
After the failure of the last pension reform in 2017, various national umbrella organizations came together to work out a compromise proposal that takes into account the demographic as well as economic challenges; the Swiss federal council, national council committee, and the council of states commission.
This article about Swiss pension reform in 2022 is provided by WHP, Asinta’s employee benefits consulting Partner in the country.