Swiss pension funds have begun to gauge the consequences of the reform of the second pillar-pension system on members, pension plans and assets to compensate for the reduction of the conversion rate used to calculate payouts.
The reform cuts the wage threshold to join a pension scheme to CHF19,845 (€20,500) per year, from the current CHF22,050 earned annually, and the conversion rate to calculate pension payouts is lowered to 6% from the current 6.8%.
If approved in the referendum in September, the reform would also entail insuring 80% of the wage under the second pillar, a significantly larger share of the salary than today, and to pay out compensation ranging from CHF100 to CHF200 per month to members affected by the reduction of the conversion rate.
Occupational pension scheme Stiftung Auffangeinrichtung BVG, with CHF3bn in total assets, expects the number of members to increase by 7,000 as a result of lowering the wage threshold to join a pension scheme.
The combination of a lower threshold, and adjustment of the so-called coordination deduction used to calculate the share of the wage insured under the first and second pillars, means that the total amount of wages insured by the scheme would increase from CHF750m to around CHF1.31bn, the fund said in a statement.
The scheme would record lower losses of around CHF3m per year following the reduction of the conversion rate. This which would lead to liquidating provisions of approximately CHF30m to pay higher rates, it added.
Still, “many questions [remain] unanswered” when it comes to paying pension supplements to compensate for lowering the conversion rate, the scheme said, adding that it would have to set aside provisions worth an estimated CHF22-81m.
Pensionskasse Post, the pension fund for the employees of the national postal service with assets worth CHF16bn, also expects to face challenges financing pension supplements.
The scheme has commissioned an analysis on the consequences of the reform, coming to the conclusion that CHF5.5m per year will have to be paid into a so-called security fund to finance supplement payments.
“We cannot yet say whether this amount will be financed through higher returns on investments, or additional increase in contributions,” said Matteo Antonini, president of the board of trustees, in an interview.
He added that the reform would have an impact on members, with the scheme potentially having to change pension plans. “The board of trustees would have to increase the wage contributions and adjust the conversion rate,” he added.
The latest digital edition of IPE’s magazine is now available
No comments yet