There are currently four challenges in occupational retirement provision (BVG):
The aim of the reform proposal is to offer solutions to these four challenges.
What is to be changed?
The coordination deduction (the salary portion not insured under the BVG) is to be reduced to 20% of the OASI salary, and the entry threshold for the BVG is to be reduced to CHF 19,845.
What would the effect be?
With the new entry threshold, 70,000 employees with low incomes would be newly insured under the BVG, and 30,000 would be better insured and would correspondingly receive higher retirement benefits. The reduced coordination deduction would significantly reduce the disadvantage for part-time employees – 58% of women and 19% of men work part-time. Anyone with an income of less than CHF 73,500 would benefit from this.
Pension gap check: Test out your personal retirement provision situation.
What is to be changed?
There are currently four contribution levels – the salary percentage that must be paid into the occupational retirement provision scheme increases with age. According to the BVG reform, there will only be two contribution levels instead of four: Between the ages of 25 and 44, 9%, and between the ages of 45 and 65, 14% of the salary subject to BVG contributions would be paid into the occupational retirement provision scheme.
What would the effect be?
Young people could save more capital earlier on, but would also have to pay higher contributions earlier, as would their employers. Employees aged 55 and over in particular would be less expensive for employers and would therefore presumably have better opportunities on the labor market.
What is to be changed?
The statutory conversion rate is to be reduced from 6.8% to 6.0%. The conversion rate determines the percentage rate at which the existing pension assets are converted into an annual pension on retirement. Life expectancy from retirement is taken into account, as is the expected interest rate.
What would the effect be?
The effect would be that the annual pension from the pension assets under the BVG mandatory scheme would be lower than before. However, this effect would be offset for younger generations because they would have to pay in higher savings contributions earlier on (see objective 2). The transition generation would also benefit from pension subsidies. Above all, however, the current regular redistribution from the working generation to pensioners would be reduced, as the current promises no longer correspond to what is actually possible in terms of financing via the funded system.
What is to be changed?
People who retire in the first 15 years after the reform comes into force cannot compensate for the reduction in the conversion rate with higher savings contributions. They should therefore receive a pension supplement.
What would the effect be?
The "transition generation" will be compensated financially for the disadvantages resulting from the reform – in particular through the reduction in the conversion rate.
If the conversion rate is lowered, the annual annuity payments will also fall. However, this will be largely compensated for by the reform, as the adjustment of contribution payments and the reduced coordination deduction will increase the pension assets. The "transition generation" will also receive a pension supplement. The amount is graduated in such a way that older workers and those with little retirement capital receive the most. Only if you have pension plan savings of more than CHF 441,000 will you be left empty-handed.
The reform would be a boost for young employees, low incomes and part-time workers. These are precisely the groups that are currently at risk from a pension gap. However, many people who are soon to retire will also benefit from the BVG reform: About half of the transition generation will be better off. It is mainly the working population under the age of 50 that will have to shoulder the burden of financing the reform: They would co-finance the pension supplements over a period of 15 years. The reform will therefore be financed from the pension funds' own resources and subsidies from the Security Fund. This will cost around CHF 11.3 billion (FSIO, Die Referendumsvorlage (referendum guidelines), p.16).
A reform is necessary in principle. Many elements of the proposal make sense, for example the reduction in the coordination deduction, the lowering of the entry threshold, and the reduction in the conversion rate. The fact that young employees have to bear the main burden when it comes to compensating the transition generation should be viewed critically. In addition, these compensatory payments open the door to a redistribution that is alien to the system.
Regardless of whether the reform is accepted or not, it is always important to conclude a private retirement provision solution in the 3rd pillar. Restricted pension plans (pillar 3a) offer tax advantages and are an important building block for supplementing retirement provision. Unrestricted pension plans (pillar 3b) offer more flexibility and are a good supplement to pillar 3a. Here you will find information on the differences between pillar 3a and pillar 3b.
The earlier someone starts saving, the better: More money can be paid in over the years, long-term saving is particularly worthwhile thanks to the compound interest effect, and with a long investment horizon it is possible to take on more risk and thus also exploit more opportunities for returns. To optimize the investment strategy, it is important to diversify investments, i.e. to spread them widely. This allows you to reduce your risk and increase your potential returns. You should also regularly review your investment strategy and adapt it to your current life situation and market developments. Your customer advisor will be happy to help and advise you.
Gaps can arise not only in savings, but also in risk protection. These also need to be closed as far as possible .
Would you like to know where you currently stand? Use our online pension calculator to find out what pension gaps you have.
You can also close gaps in your occupational retirement provision by making voluntary purchases into the pension fund. The extent to which this is possible can be seen on the annual pension fund statement. These purchases not only reduce the gaps in your retirement provision, but can also be deducted from your taxable income and are therefore also very attractive from a tax perspective. At best, it makes sense to stagger them over several years. There are also a number of things to consider in the event of early retirement. This is why individual advice from a customer advisor is always sensible and important.
There is no general answer to this question; it depends on your personal situation.
If you work part-time, the planned reduction in the coordination deduction and the entry threshold would probably mean that you are better covered because a larger proportion of your income would be insured. However, you would probably also pay slightly higher contributions.
If you belong to the transition generation ("people who will retire in the first 15 years after the reform comes into force"), your pension fund can also tell you whether your pension would be reduced by the reform and whether you would benefit from compensatory pension supplements.
Ask your employer how you are currently covered and ask for an explanation of your annual pension fund statement. Among other things, you will find out which part of your salary is covered by mandatory or non-mandatory insurance (only the mandatory part would be affected by a reduction in the conversion rate), whether you still have potential for voluntary purchases into the pension fund, and what partial or early retirement would cost you.
Especially if you belong to the 50-plus generation, individual pension and retirement provision planning always makes sense. This allows you to set the course for your future today – for your financial freedom after retirement.
Three major trends will influence the future of occupational retirement provision:
Demographics: The fact that the population is getting older and there are relatively few children will continue to pose a challenge for our pension system – further adjustments to contributions and benefits are possible.
The challenge for the state retirement provision scheme (OASI) is even greater. This is because, in principle, every employed person saves for themselves in occupational retirement provision (funded method), whereas in the state retirement provision scheme the redistribution method is used – all contributions from active employees go into a large pot, from which pensions are financed. If there are fewer people paying contributions, there will be gaps – when the baby boomers retire, this will become a major issue.
The second trend influencing occupational retirement provision is technology: Digitalization will also increasingly find its way into occupational retirement provision. In the future, there will probably be improved digital tools for managing and optimizing retirement provision, including for the insured themselves. Automated advisory tools are also conceivable. Our pension calculator already gives an idea of the direction in which technology could develop.
Third, it is possible that the legal framework conditions will change – in view of economic and demographic developments, it will also be necessary in the future to review the legal basis of occupational retirement provision from time to time and adapt it if necessary.
Federal Social Insurance Office (FSIO)
Pension fund comparison – comparison of pension fund benefits
Pension forum – specialist portal for occupational retirement provision
