BVG reform The most important questions and answers on the reform of the second pillar
On September 22, the electorate will once again decide on a social policy proposal, namely the reform of occupational benefits insurance. Below, blue News answers the most important questions and answers about the proposal.
What does the pension system in Switzerland look like?
The Swiss pension system is based on the three-pillar principle: the first pillar with state old-age and survivors' insurance (AHV), the second pillar with occupational pension provision and the third pillar with voluntary private pension provision. Occupational pension provision is an important supplement to AHV in order to cover living costs after retirement.
During their working life, employees save up retirement assets in the pension fund with their salary contributions and their employer's contributions. These are later used to pay the pension fund pension.
What about the second pillar?
Because life expectancy and the proportion of pensioners in the population are increasing and at the same time the capital invested by the pension funds is generating lower returns due to low interest rates on the financial markets, pensions in the so-called mandatory part of the occupational benefit scheme are no longer adequately financed.
In addition, low-income earners will later have no or a very small pension fund pension. An above-average number of women are affected because they often work part-time or in sectors with low wages.
How are pension fund pensions developing?
According to the recently published retirement barometer from the VZ Wealth Center, the pensions that a 55-year-old expects to receive when they retire in ten years' time shrank by a fifth between 2002 and 2024 . Accordingly, pension fund pensions fell by 39 percent.
What is the conversion rate?
Up to a certain income, the law stipulates how much pension must be paid out per franc saved. The minimum conversion rate is currently 6.8 percent. This means that a pension of CHF 6,800 is paid out for every CHF 100,000 of retirement capital.
How has the occupational benefit scheme changed?
Occupational pensions were introduced in 1985, when the Federal Law on Occupational Retirement, Survivors' and Disability Pension Plans (BVG) came into force. After an initial BVG reform in the noughties, several attempts at reform failed, including a reduction in the conversion rate. In 2020, Parliament launched a new attempt, which will now be decided by the electorate.
What does the planned BVG reform include?
The proposal is intended to financially stabilize the second pillar and help people with low incomes to receive a higher pension. The new reform envisages lowering the minimum conversion rate to 6.0 percent. This means that CHF 6,000 would be paid out for every CHF 100,000 of retirement capital.
At the same time, according to the BVG reform, low earners should receive a higher pension later on: They and their employers are to pay higher savings contributions each month than today. The so-called fixed coordination deduction, which currently determines the income to be insured, will be abolished. Instead, 80 percent of the income subject to AHV contributions will be insured in future.
In addition, people whose income is currently too low for this are now to receive a second pillar. The entry threshold for the pension fund will be lowered from CHF 22,050 annual salary to CHF 19,845. Around 70,000 people, including many women with small workloads, will now have their salaries insured in the occupational pension scheme.
What happens to the transitional cohorts?
Anyone who retires in the first 15 years after the bill comes into force and does not have much time for additional savings can receive a lifelong pension supplement of up to CHF 200 per month. The decisive factors are the year of birth and the amount of retirement capital.
Around half of all insured persons are likely to receive the supplement. If the reform comes into force in 2027, it will be those born between 1962 and 1976. The supplements will cost a total of around CHF 11.3 billion over 15 years. They will be financed by the pension funds and with contributions from employers and employees.
Who is affected by the reform?
According to the federal government, the pension fund reform will primarily affect employees who are insured according to the BVG minimum or only a little more. This is likely to be no more than a third of all insured persons.
Model calculations assume that people with an annual salary of less than CHF 60,000 and people with multiple jobs will benefit from higher retirement assets. Although certain people will have to pay less with the reform, they will also receive less pension.
And it cannot be ruled out that someone will pay in more and receive less pension. For whom the reform will affect depends on their personal situation - for example, their professional career and the regulations of their pension fund.
Who is not affected?
Those insured beyond the mandatory scheme are not directly affected. However, all employees and their employers finance part of the pension supplement for the transitional generation. Nothing will change for those who have already retired.
Who welcomes the proposal?
The Federal Council and Parliament recommend the reform for approval. The Yes committee includes social politicians from the SVP, FDP, Center Party, GLP and EVP. The business umbrella organizations Economiesuisse and the Employers' Association are also backing the reform, as are the Trade Association, the Insurance Association, the women's organization Alliance F and the Association for Senior Citizens' Issues. The Baselland Green Party has also decided to vote in favor.
What are the arguments of the supporters?
The main argument put forward by those in favor of the reform is that significantly more people would receive a higher pension than a lower one. People who earn little would be better protected in old age. Women in particular would benefit from this. This would reduce the risk of poverty in old age.
For the proponents, there is no alternative to the reform. Without a reduction in the conversion rate, pension funds that only offer minimum benefits would continue to use income from the retirement assets of working people to pay pensions to retired people.
Who is fighting the bill?
The referendum against the bill was launched by the Swiss Federation of Trade Unions (SGB). The SP and the Greens support it, as does the employees' umbrella organization Travail Suisse. At the beginning of August, eight business associations launched their own No campaign. Individual sections of the SVP have also adopted a "no" position. The pensioners' association Avivo is also campaigning against the bill.
What are the opponents' arguments?
"BVG crap", "sham package", "scandal": these were the buzzwords used by opponents of the reform in the referendum campaign. They complain that the proposal would require more to be paid into the second pillar, but the pension would still be lower for many. This is particularly true for sectors with low wages, but also for over-fifties.
The disadvantages for women due to career breaks and the unequal distribution of unpaid work would also not be eliminated. There is still no provision for credits for childcare and care work, as is the case with the AHV.
How high are the campaign budgets?
The supporters of the pension fund reform have started the referendum campaign with a fuller budget than the opponents. Almost three and a half million francs compared to just under two million francs. The largest donors to the Yes alliance include the umbrella organizations Economiesuisse (CHF 1.4 million) and the Employers' Association (CHF 1 million) as well as the Insurance Association (CHF 0.66 million).
On the opponents' side, the Swiss Federation of Trade Unions (SGB) and the SP have the largest budgets with CHF 0.7 million each. The trade union Unia and the employees' umbrella organization Travail Suisse are also making significant sums available for the referendum campaign.
What chances does the bill have?
The outcome is open. The first polls show a mixed picture. According to the survey conducted by gfs.bern on behalf of SRG, 49% would have definitely or somewhat approved of the BVG reform on August 4. 39% would have definitely or rather voted against. 12 percent said they were still undecided.
The first poll conducted by Tamedia and "20 Minuten" showed a significantly worse starting position for the pro camp. In the survey conducted by the Leewas Institute, 59% of respondents said they wanted to reject the bill, while only 33% said they agreed.
