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Old age Employers and employees reach pension compromise

Old lady helping a young girl with the ironing

Bosses and workers have been ironing out their differences over pension reforms

(Keystone)

Talks between bosses and workers on reforming occupational pensions (OP) have resulted in a compromise, with both sides appearing satisfied. 

“The negotiations, which have gone on for more than a year, are practical, respectful and goal-oriented,” said Valentin Vogt, president of the Swiss Employers Association, on Tuesday. “It’s a real compromise. That fills me with pride.” 

Vogt managed to get the trade unions to agree to reducing the minimum conversion rate in compulsory occupational pension schemesexternal link from 6.8% to 6%. As a result, 12% of the pension has gone. The reduction has already failed twice at the polls following resistance from the left. 

Currently, several billion francs have to be redistributed annually in occupational pension plans because the pension promises cannot be covered by the existing OP retirement assets. The main reasons are rising life expectancy and lower investment income. 

“We have to accept the reduction,” said Pierre-Yves Maillard, president of the Trade Union Federation. He added that, unlike previously, it will now be compensated. 

Vogt has also had to make concessions. One is a solidarity-financed pension supplement for future pensioners. This will be financed by a wage contribution of 0.5% on incomes up to CHF853,200 ($863,200). 

This will benefit lower-income and part-time employees immediately. It will also preserve the pension level of a transitional generation of 15 years. After that, the government is to decide annually on the amount of the pension supplement. 

Women benefit 

The trade union negotiators have also made significant improvements for part-time workers and low-income workers, especially women. 

The coordination deductionexternal link, which determines the insured salary, is to be halved to CHF12,443. The consequence of this is a higher insured salary, which benefits part-time employees in particular. 

“This better reflects today’s realities in the labour market,” said Adrian Wüthrich, president of the Travail Suisse union. 

The entry threshold remains at CHF21,330, so nothing changes for employees with multiple incomes. For this purpose, the wage contributions will be adjusted so that older employees become significantly more competitive compared to today. 

Currently, the old-age bonusesexternal link are 15% for 45- to 54-year-olds and 18% for older employees. In the future, they should amount to 14% of the insured salary for both age groups. As a countermove, the contributions for younger employees will tend to increase. In future, there will only be two age categories. 

‘No miracles’ 

The additional costs amount to CHF2.7 billion or 0.9% of wages. Vogt spoke of “good cost-effectiveness”, which was also acceptable for small and medium-sized companies. 

Maillard pointed out that with the compromise the pension level would be maintained, sometimes even increased. Someone would have to pay for that though, he said. “There are no miracles.” 

On Tuesday the two sides handed over their proposal for OP reform to Interior Minister Alain Berset. He had asked them to find a solution after the failure of the previous pension reform in September 2017. 

The government must now decide whether to submit the proposal to parliament. Voters are likely to have the final say on the issue in a nationwide ballot.

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