Swiss think tank Faire Vorsorge has put forward a more radical reform of the country’s second pillar pension system than the ‘light touch’ proposal by Innovation Zweite Säule (IZV), the association of Swiss second pillar experts, and consultancy c-alm, which aims to put an end to “discrimination” against low earners.
According to Faire Vorsorge, the coordination deduction, an amount set by the government used to determine the share of insured wages under the second pillar system, must be “completely eliminated”.
This year, the coordination deduction is CHF26.460, up from CHF25.725 in 2024. Getting rid of the coordination deduction means putting an end to the disadvantage incurred by low earners and part-time employees, it added.
“This allows [employees] to build up higher retirement savings overall,” the think tank said in its reform proposal.
Currently, low earners and part-time workers with an occupational pension, mainly women, are “discriminated against” because only one part of their wages is insured, a mechanism leading to lower retirement savings, it added.
The entire insured wages under both the first pillar AHV and second pillar, according to Faire Vorsorge’s plans, is coupled with a uniform contribution rate of 10%, regardless of age.
As age increases, the share of contributions for employees increases continuously from a quarter to three quarters of the contribution, and decreases for employers, according to the proposal.
“Material parity” in terms of contributions should be maintained across the entire working life, it added.
This new type of contribution increases the opportunities for returns on savings invested in capital markets, while streamlining the second pillar system, and making it understandable for pension funds’ members, according to the think tank.
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