Switzerland’s pension reform package Altersvorsorge 2020 was rejected in a binding referendum on Sunday.
The public voted against changes to the Swiss first and second pillar systems, as well as additional financing for the first pillar AHV.
The Swiss people had to decide on a complex package of technical adjustments to the pension system as well as a VAT increase to help finance the first pillar.
The two separate questions posed in the Sunday referendum were both rejected by the public, albeit only by narrow margins:
- 52.7% said no to the Altersvorsorge 2020 package, which included lowering the conversion rate and a one-off first pillar pension top-up for all Swiss people;
- 50.05% of the people said no to increasing VAT to help finance the first-pillar AHV fund.
The second question had to be put to the cantons as it would have meant a change to Switzerland’s constitution – 13.5 cantons and half-cantons out of 26 rejected this proposal.
The rejection means the country’s VAT will be lowered for the first time since it was introduced in 1995, creating considerable costs for Swiss businesses that will have to change their bookkeeping.
The cut – from 8% to 7.7% as of 2018 – is due to funding no longer required to top up the invalidity fund IV.
The public and cantons were asked to approve a different use of this money, i.e. to top up the first-pillar pension fund AHV.
Swiss social minister Alain Berset said on Swiss TV that he “accepted the result” and would “talk to all stakeholders including those opposed to the reform” to find out what the next steps should be.
“A reform is needed and we have to keep on working and find a solution,” he added.
Asked by a journalist whether the reform package was too complex, Berset said: “In a direct democracy we have to be able to explain complex topics like the pension system.”
The Swiss pension fund association Asip called for an “immediate start” to fresh negotiations.
“The ‘No’ by the Swiss people to the reform package Altersvorsorge 2020 should not be understood as a categorical ‘No’ to a reform in the retirement system,” Asip president Jean Rémy Roulet said in a press release. “We now need a reform to address the most pressing problems.”
According to the Asip those are: Moderate additional financing for the AHV, a sensible further flexibilisation of the retirement age and a lowering of the minimum conversion rate with compensatory measures in the second pillar (BVG) to preserve the pension level.”
The reform package “Altersvorsorge 2020” was not the first pension-related referendum that failed in Switzerland:
In 2004, a reform of the female retirement age in the first pillar was rejected with more than 68% voting against.
In 2010 a slight adjustment of the conversion rate, which remains at 6.8%, was packed into a referendum along with questions regarding insurers and failed with almost 73% voting against.
The industry reacts
Consultants surveyed by IPE emphasised that reforms to Switzerland’s pension system were still “necessary and urgent”.
Jörg Odermatt, CEO of PensExpert, said the reform was “too complicated” and not transparent enough. “For the young this is good news: it would have been them and the following generations who would have had to pay for this reform,” he said.
Peter Zanella, actuary at Willis Towers Watson, said he was “very pleased and positively surprised that this badly designed package was finally rejected by the Swiss people”.
“I think that in the last couple of crucial weeks voters have realised that there were too many pitfalls and unwanted new and complicated regulations that not even experts ultimately recognised in some cases,” he said. “They also realised that it corresponded in fact to a substantial increase of social security benefits that would soon require additional funding, although the government presented all as a sustainable package.”
However, he urged authorities to come up with a “simple, transparent new regulation” involving a lowering of the conversion rate, adjusting the retirement age, and increasing funding for AHV.
Jürg Walter, managing director at Libera, said: “It remains undisputed measures have to be taken in the foreseeable future to secure the financing of the pension system. Independent of the outcome of the referendum, an adjustment of the conversion rate and other important actuarial measures [relating] to the current low interest rate environment and the rising longevity assumptions should be considered.”
André Tapernoux, wealth leader for Switzerland at Mercer, said the vote result “opens up opportunities for individual reforms of each of these two pillars”.
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