Swiss pensions – lump sum withdrawal restrictions rejected by Council of States

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Against the wishes of the Federal Council, Switzerland’s upper house, the Council of States, rejected a plan to prevent people from withdrawing lump sums from their 2nd Pillar pensions, according to the newspaper Tribune de Genève.

Last week, the Council of States voted 25 to 15 to reject the plan.

The Federal Council thinks forcing people to convert their pension money into an annuity, which pays a regular income on retirement, will reduce the number of people resorting to state aid or supplementary benefits when they run out of money in retirement.

Following a rejection in March by the National Council, Switzerland’s parliament, a commission recommended the Council of States reject the plan too.

Konrad Graber, the commission’s spokesperson, reminded members of the Council of States that the plan was convincingly rejected by the National Council and that there is no study definitively showing a causative link between lump sum withdrawal and people resorting to supplementary benefits.

Alain Berset of the Federal Council argued there is a potential link and called on members not to throw the baby out with the bath water.

Some other parts of the plan could survive. One requires those aged 58 or over, who are unemployed, to leave their 2nd pillar pension with the pension provider of their last employer and not touch it until later.

Another element that could survive is a system that requires, on death, any portion of an estate over CHF 50,000 be used to refund any supplementary benefits paid. In the case of couples, this would only kick in after the death of both.