The Swiss government has announced that the minimum rate of return on company pensions will be cut by one percentage point.This content was published on September 10, 2003 - 16:43
From January 1, 2004, insurers will have to deliver only a 2.25 per cent rate of return on pensions, compared with four per cent a year ago.
The move coincided with demonstrations across Switzerland protesting against plans to reduce state pensions.
Although the protests were not as big as unions had hoped for, they are an indication of widespread concern over the state of Switzerland’s pensions schemes.
The unions are also angry at proposals to raise the retirement age to 67.
“Switzerland is one of the richest countries in the world,” said Natalie Imboden, secretary of the Swiss Federation of Trade Unions.
“People can’t understand why the government can’t afford it,” she told swissinfo.
“Young people in Switzerland expect to get a pension, and it’s important to have this sense of security.”
The cut in returns on company pensions is the second in a year. On January 1, the government reduced the rate of return on occupational pensions to 3.25 per cent from four per cent.
The big insurance companies have been complaining for some time that they can no longer guarantee such high returns on pensions when interest rates in Switzerland are so low.
But critics of the cut say the Swiss government has rewarded insurance companies at the expense of pensioners.
They also point out that rates of return on pensions were not increased when interest rates were high.
The government said the rate of return would now be reviewed on an annual basis. It added that this was necessary given the volatile nature of the financial markets, which has affected returns on investments.
The unions and the centre-left Social Democratic Party – one of the four parties in government – criticised the cuts as too severe. The Social Democrats had recommended a reduction to 2.5 per cent, in view of the recent market recovery.
However, the news was welcomed by the markets and centre-right parties, while the Christian Democrats, who are also in government, said they were just happy the rate had not been cut even further.
The government’s decision came just after a Senate commission on social welfare and health called for a change in the law to prevent insurers from unilaterally reducing the rate of return on occupational pensions.
That decision was in response to a move earlier this year by leading insurer, Winterthur, to cut the rate of return over a certain salary threshold.
The commission’s recommendation means that a law, which is due to be passed this year, is likely to be amended to prevent insurers from making “short-term and sudden changes” to private pension schemes.
The discussion over the rate of return on occupational pensions – the so-called “second pillar” – adds to the worries expressed by Swiss trade unions at demonstrations on Wednesday about proposals to raise the retirement age.
Swiss President Pascal Couchepin caused a furore earlier this year when he suggested raising the pension age in two stages to 67 from the current 65. He said this was necessary to “save” the state pension scheme – the “first pillar”.
Unions and the Centre-left have vowed to block any moves to tamper with the retirement age.
swissinfo with agencies
The cut - from 3.25% to 2.25% - is the second in a year.
It will come into effect on January 1, 2004.
The decision was taken to ease the pressure on insurers, which have been struggling to maintain the existing minimum rate.
The government said the rate would henceforth be reviewed on an annual basis.
The unions and the Centre-left have criticised the cuts as too severe.
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