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Foreign workers concerned over pension changes

Unions fear that skilled workers, such as IT specialists, will leave Switzerland in droves Keystone

European Union workers in Switzerland will in many cases no longer be able to take their minimum company pension contributions back home as a lump sum from June.

This content was published on January 17, 2007 - 18:37

Unions fear the change will lead to an exodus of workers after being deluged with complaints in recent months.

The rule change is part and parcel of a bilateral agreement that came into force on June 1, 2002, making it easier for EU workers to access the Swiss labour market.

Part of the agreement involved harmonising the pension arrangements of the participating countries, although this was given five years to put into place.

Up until June 1 this year, EU workers plying their trade in Switzerland can cash in their entire compulsory company pension schemes, known as the second pillar, when they return home.

From the middle of 2007 most will have to wait until they retire before receiving pension payments in instalments. The rule also applies to Swiss who relocate permanently to an EU country.

One reason behind the change is to avoid other countries having to provide for citizens with no pension, according to tax lawyer Gabrielle Grether, a partner at the Basel-based law firm Grether McGeorge that advises foreigners in Switzerland.

"Other countries' social welfare schemes did not want people cashing in their Swiss pension scheme [as a lump sum to spend before retirement] and then going back to their countries and saying 'feed me'," she said.

Exodus

Switzerland's biggest union, Unia, recently warned that the change could result in highly skilled workers leaving Switzerland in their droves.

"We know of many migrant workers who are thinking of quitting before the new rules take effect," said Unia manging director Rita Schiava.

Unia offices were so inundated with worried foreign workers - particularly Italian, Portuguese and Spanish – that the respective embassies had to step in to help soothe concerns.

But Grether believes most workers will opt to stay once the complex rules have been properly explained.

"I have heard from a lot of people with panic in their voices, but this is due to misinformation," she said. "Many of them thought their money would be gone completely or that they would never get a pension."

"But if people think normally then they should re-evaluate. It is perfectly normal in most countries for pension contributions to stay frozen until they retire so they should be used to the concept," she added.

swissinfo, Matthew Allen

Key facts

A Federal Statistics Office study last year found that one in five workers (829,000) in Switzerland in 2005 was foreign – a 1.5% increase from the preceding year.
The largest group of foreign workers was Italian (20%), followed by the Balkans (19.5%), Portgual (11.6%) and Germany (11.3%).

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Pension changes explained

The changes in pension rules also apply to workers who leave to settle in Switzerland's fellow European Free Trade Association countries Norway and Iceland, but not to the other EFTA state Liechtenstein.

Workers cannot take away a lump sum from their Swiss compulsory company pension scheme if they join a similar scheme in the EU or EFTA country in which they relocate.

Departing workers may also take a lump sum out of this Swiss pension scheme, under certain conditions, to buy a home.

The rule only applies to the statutory minimum contributions. Some compulsory company pension schemes in Switzerland pay more on top, and any excess cash may be extracted as soon as the worker leaves the country.

The amount of money that constitutes the minimum is calculated according to an individual's earnings.

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