Publica, one of Switzerland’s largest pension funds with CHF39.4bn (€41.3bn) in total assets, has seen an increasing trend towards lump sum pension withdrawals upon retirement, said director Doris Bianchi in an interview with newspaper Handelszeitung.
“We are observing a clear trend towards capital withdrawal in a mixed form. The lower a person’s retirement savings are in the pension fund, the more likely they are to withdraw capital,” she said.
The trend towards lump sum withdrawals began when Pensionskassen switched from defined benefit (DB) to defined contribution (DC) plans, and has progressed as the conversion rates to calculate pension payouts decreased.
Bianchi confirmed that pension funds have increased savings contributions to compensate for falling conversion rates.
According to the latest figures available on the matter by the Swiss Federal Statistical Office (BFS), in 2022 54,273 retirees withdrew a total of CHF13bn from pension funds in the form of a lump sum, or partial lump sum payment, a 15.4% increase compared with 2021.
Discussions in Switzerland continue on the level of pension payouts in the second pillar, with capital withdrawals considered one of the reasons why payouts are falling, and with the referendum on the 13th month of pension payouts to take place on 3 March.
Lukas Müller-Brunner, director of the pension fund association ASIP, said that between 2015 and 2020 pensions fell significantly, by almost 10% overall, without taking into account lump sum withdrawals.
“If you take capital withdrawals into account, you pretty much get the same [amount] of benefits. Since 2020 capital withdrawals have increased significantly, so the level of benefits also increases if you calculate everything,” he added.
For Roger Nordmann, member of parliament in the National Council for the Social Democratic Party, one reason for the poor performance of the second pillar is high asset management costs and mediocre investment returns.
Nordmann believes that, if the Swiss vote in favour of the 13th month of pension payouts, a “fundamental reform” of the second pillar pension system is necessary.
Trade unions, the Social Democratic Party and the Greens are supporting a public vote on the reform of the second pillar reform passed by the parliament in March last year, decreasing the conversion rate to calculate pension payouts from 6.8% to 6%.
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