Switzerland adjusts mandatory second pillar pensions to inflation from 2022

No comments

Part of the pensions mandatory pensions under the second pillar will see for the first time an adjustment in line with inflation from next January, the Swiss Federal Insurance Office (FSIO) said in a note.

An adjustment of 0.3% will apply from 1 January 2022, to disability and survivors’ pensions paid out since 2018, and of 0.1% for pensions paid out for the first time in 2012.

The rate of 0.3% for pensions running from 2018 results from the development of prices between September 2018 and September 2021, based on the consumer price index (CPI).

Survivors’ and disability mandatory pensions in the second pillar are periodically adjusted until retirement age to mirror the increase in the consumer price index.

According to the Swiss Federal Statistical Office (FSO), the CPI remained stable in September compared with the previous month, at 101.3 points. Inflation stood at 0.9% in September compared with the same month the prior year.

CPI’s stability is the consequence of “opposing trends” balancing each other, said the FSO, pointing at the prices for heating oil and air transport that increased while the prices for international package holidays decreased.

Moreover, certain survivors’ and disability pensions that have never been adjusted to inflation, and paid since 2008, 2011 and 2012, could go through realignment with the trajectory of prices on 1 January 2022.

A comparison of the CPI for September 2021 with the index for 2008, 2011 and 2012 shows so far that only the survivors’ and disability pensions paid out since 2012 have to be adjusted to price developments for the first time in January next year.

The adjustment rate for the survivors’ and disability pensions paid out since 2012 is 0.1%, based on the change in prices between September 2012 and September 2021, according to the CPI.

The pension insured under the first pillar AHV pensions won’t see an overall adjustment to inflation in 2022. An adjustment of survivors’ and disability pensions through the CPI will be examined as part of the next increase of AHV pensions in January 2023 at the earliest, the FSIO said.

Pension funds can instead decide to adjust pensions in line with inflation, taking into account their financial resources and for benefits that do not have to go through a periodical adjustment prescribed by law.