Is the Pension Reform Backlog Slowly Clearing?

Author: Lucas Widmer

During the 2021 winter session, Swiss parliament addressed long-awaited reforms to the Swiss pension system’s first and second pillars. Here’s a summary of the key outcomes:

AHV Reform 21: Equal Retirement Age for Women and Men

Parliament approved a comprehensive package of measures for the first pillar. The retirement age for women will be raised from 64 to 65, equalizing it with men’s retirement age. This increase will be implemented in increments of three months per year and is expected to yield savings of about ten billion francs over ten years. To compensate for the extended working life, nine transitional age groups will receive a lifelong pension supplement.

While the proposal was passed with a two-thirds majority in both the Council of States and the National Council, resistance persists from the SP and the Greens, who have announced plans to launch a referendum.

Lower Minimum Pensions in the Occupational Pension Scheme

Prior to the winter session, various reform proposals for the 2nd pillar were long debated. Ultimately, the National Council discussed the social partner compromise and decided to remove the key element of pension supplements for new retirees.

The approved proposal calls for a reduction in the conversion rate from 6.8% to 6%. Consequently, for every CHF 100,000 of pension capital, an annual pension of CHF 6,000 will be paid instead of CHF 6,800. To accommodate trade union and employer demands, graduated supplements ranging from CHF 1,200 to 2,400 per year were agreed upon for 15 cohorts of new pensioners.

This change doesn’t alleviate the systemic redistribution issue in the 2nd pillar. The reduction in the conversion rate eases pressure on pension funds but remains economically unrealistic in the current financial market context. The feasibility of these legislative changes is also uncertain, as left-wing political groups have threatened referendums against both the AHV and BVG reforms even before the winter session.

Conclusion

Although Parliament made headway in the winter session, the implementation of these changes remains uncertain, with considerable opposition from influential groups. These reforms, if enacted, may only mitigate structural issues in the first two pillars but won’t resolve them completely. Furthermore, implementation could take several years.

Employers and active employees have various options to strengthen their occupational pensions independently of these reforms. From our experience, taking personal responsibility in this area is highly beneficial. As pension experts, we assist companies and individuals with conceptual analysis, implementation, and ongoing monitoring of pension solutions, highlighting various available options. 

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