by On 22 September 2024, the Swiss will vote on two popular initiatives. The first is the biodiversity initiative “For the future of our nature and our landscape”. The second is on a plan to reform Switzerland’s occupational pension system. Photo by Andrea Piacquadio on Pexels.comReform of Switzerland’s pension system is an increasingly pressing issue given the predictable demographic shift underway. Occupational pensions (2nd pillar) are pots of money built up from salary deductions. Eventually, when workers retire, the pension sum is used to pay a regular amount based on the total in the former employee’s account. These regular pension payments are known as annuities. The problem is that the current annuity rate is based on shorter life expectancy and higher interest rates. With
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On 22 September 2024, the Swiss will vote on two popular initiatives. The first is the biodiversity initiative “For the future of our nature and our landscape”. The second is on a plan to reform Switzerland’s occupational pension system.
Reform of Switzerland’s pension system is an increasingly pressing issue given the predictable demographic shift underway.
Occupational pensions (2nd pillar) are pots of money built up from salary deductions. Eventually, when workers retire, the pension sum is used to pay a regular amount based on the total in the former employee’s account. These regular pension payments are known as annuities. The problem is that the current annuity rate is based on shorter life expectancy and higher interest rates. With life expectancy rising and interest rates low, the current annuity rate is not sustainable.
To deal with the consequences of rising life expectancy in a low interest rate environment, the government came up with a series of reforms, which include lowering the annuity rate, increasing the contribution rate, and changing the enrolment rules to ensure more workers, in particular those on low pay or working part time, have occupational pensions. The changes will not affect those currently receiving pensions.
However, the committee against the government’s plan argues that cutting the annuity rate represents a further cut to pensions that are already too low. And it says increasing contributions will hurt net incomes.
The Federal Council supports the initiative, arguing that reform is required to ensure sufficient funding to durably pay retirees annuities. Parliament (113 vs 69) and the Council of States (29 vs 8) also support the reform plan.
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