BVG reform referendum: vote yes or no?

Last update: 17.09.2024 08:31

Vote yes or no to the BVG reform referendum? On September 22, 2024, Switzerland will decide on the future of occupational pensions. The reform will bring major changes to your retirement pension. Find out what the BVG reform referendum means for you and your finances in the future.

The BVG reform aims to make your occupational pension provision fit for the future. Imagine you’re like Lisa, a 35-year-old graphic designer from Zurich. Do you want your pension to be secure later on, regardless of whether you work full-time or part-time? That’s exactly what the reform aims to achieve. The main objectives of the BVG21 reform are, according to the Federal Social Insurance Office:

• Maintain the pension level: You should have enough to live on in old age.
• Strengthen the financing: Your pension should be built on a solid foundation.
• Improve pension provision for part-time employees: Women like Lisa in particular, who often work part-time, should benefit from this.

These goals are important because pensions in the mandatory part of the occupational benefit scheme are no longer well enough financed. This is due to the low returns on the financial markets and rising life expectancy. This particularly affects pension funds that only offer their insured members the statutory minimum or little more.

The reform also aims to tackle a second problem: If you earn little, like Pesche from Bern, you will have little or no pension fund pension later on. Women who often work part-time or in sectors with low wages are disproportionately affected by this. The BVG21 reform aims to change this. You should receive a secure and fair pension, regardless of whether you work full-time or part-time and earn a lot or a little.

The BVG reform brings some changes for your occupational benefits insurance. Below you will find the most important points. I have described the changes in more detail in another specialist article.

• Reduction in the minimum conversion rate: the rate will be reduced from 6.8 % to 6.0 %. It sounds complicated, but imagine you have CHF 100,000 in your pension fund, like Anna, a 50-year-old teacher from Lucerne. Previously, you would have received an annual pension of CHF 6,800. With the new rate, it would be 6,000 francs.
  Important to know: Currently, around 14 percent of all BVG insured persons have minimum insurance. This means that 86 percent are not affected by this reduction at all. The conversion rate is already lower for them today (5.3 percent on average). For them, their pension funds have lowered the conversion rate on the extra-mandatory contributions so low that the average conversion rate is 5.3 %.
• Reduction of the coordination deduction: This will no longer be a fixed CHF 25,725 regardless of the level of employment, but will in future be 20 percent of the AHV salary. This means that the amount of the coordination deduction will depend on your salary in future. This is good for you if you work part-time, have several jobs or earn little. More of your salary will be insured and you will save more for your pension.
• Adjustment of retirement credits: there are now only two contribution scales. For 25 to 44-year-olds, they increase from 7 % to 9 % of the insured salary. For over 45s, they will fall from 18% to 14%. This makes older employees more attractive to employers.
• Introduction of a pension supplement: To compensate for the reduction in the conversion rate, there will be a pension supplement for 15 age groups. This amounts to CHF 100 to 200 per month.
• Easier entry into the pension fund: The minimum salary for entry into the pension fund will be reduced from CHF 22,050 to CHF 19,845. This will enable more people to build up a pension fund pension.

These changes are intended to ensure that more people are better protected in old age. Because small salaries will have to bear more salary deductions in future than before, the SP and trade unions are talking about a “BVG scam”. They are focusing on the first pillar of the pension system and want to expand it. Because with pension funds, you are basically saving for yourself. This makes hidden redistributions – as in the AHV – from young to old and from high to low wages more difficult. This is why the BVG reform referendum was held.

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The BVG reform brings several advantages:

1. Better protection for part-time employees and people on low incomes: By reducing the coordination deduction, part-time employees and people on low salaries will benefit in particular. Imagine you are like Martina, who works part-time. Thanks to the reform, a larger part of your salary is insured, which increases your future pension.
2. Compensation for the reduction in the conversion rate: The introduction of a pension supplement for 15 cohorts approaching retirement age is intended to cushion the reduction in the minimum conversion rate. This means that as a member of the transitional generation, you will receive an appropriate pension despite the adjustment to the conversion rate. The supplement amounts to CHF 100 to 200 per month.
3. Relative coordination deduction (20%) instead of a fixed deduction makes it easier to build up pension fund assets, even for part-time employees. According to the Swisscanto study, this would benefit around 20 percent of all insured persons whose pension funds (still) apply the statutory coordination deduction. The others already apply variable deductions today or do without a coordination deduction.
4. Easier access to the pension fund: The minimum salary for joining the pension fund will be lowered. This means that more people will pay into the occupational pension fund. If, like Pesche, you work in a low-wage sector, this means you can start building up your pension fund pension at all.
5. Better financing of the 2nd pillar: The reform is intended to improve the finances of the mandatory pension funds. This will be achieved through more contributions (as a result of a lower coordination deduction) from more insured persons (as a result of a lower entry threshold) and the lower conversion rate.

These advantages show that the BVG21 reform is aimed at making your occupational benefit scheme more future-proof.

Despite the intended improvements, there is tangible criticism of the BVG21 reform. Here are the most important points with concrete figures. These will help you to better assess the impact of the reform:

Experts from the renowned pension consultancy c-alm have calculated that 50% of insured persons will benefit from the pension supplement, although the reform only affects around 15% of insured persons. For 35% of insured persons, the supplement is not offset by a reduction in their pension; on the contrary, they receive a benefit that is not objectively justified. The Managing Director of the Migros Pension Fund describes the situation as follows: “We have 51,000 insured persons, 23 of whom are affected by the reduction in the conversion rate. Around 19,000 belong to the transitional generation, 8,000 could receive supplements”. It is distributed according to the watering can principle to increase the chances of a “yes”.

The pension supplement has a payback period of 28 years, as the experts at c-alm have calculated. This is because lowering the conversion rate will reduce the burden on younger people by CHF 400 million per year. However, this is offset by additional costs of 11.3 billion for pension supplements. In effect, they are paying for pension increases for insured persons in the transitional generation who are not affected by cuts at all. The financial relief for younger people will not be felt for around 30 years. Would you privately invest your money in a project with such a long payback?

There are numerous unresolved implementation problems in determining the pension supplement, especially as certain necessary information is not available to the health insurance funds at all. Experts therefore expect a significant increase in administrative costs.

According to experts, lowering the minimum conversion rate from 6.8 % to 6.0 % is not enough to secure long-term financing. Calculations show that a rate of 5.0 % to 5.5 % would be appropriate in order to sustainably finance pensions in the mandatory scheme. The fact is that the average conversion rate applied is 5.3 % according to the latest pension fund study by Swisscanto.

The reform will lead to a redistribution of insured persons with wraparound pension plans to insured persons who are predominantly insured under the mandatory scheme. Today, around 86 % of insured persons are insured in enveloping funds that have already done their homework and apply lower conversion rates. The reform will hardly bring any improvements for them. On the contrary, they will be penalized by the reform. After the reform comes into force, all pension funds will have to pay an additional contribution for 15 years in order to finance the pension supplement. This will cost around CHF 11.3 billion and must be paid by all pension funds via a salary-related contribution of up to CHF 339 per person per year. So while all insured persons have to make contributions, the surcharges for the small group of 50-65 year olds today flow mainly into those pension funds that only offer their insured persons the statutory minimum or little more. A classic redistribution.

Depending on salary level and age, the reform will have a considerable impact on benefits and their financing. This is shown by a study commissioned by Proparis, a commercial pension fund with around 70,000 SME policyholders from many sectors (including hairdressers, butchers, painters and florists). Around 58 percent of those insured would have to expect a lower pension. And although their insured persons and employers would each have to pay around 0.9% higher salary contributions, proparis would bear around CHF 8.3 million more in pension losses each year over the next 15 years. Gastrosuisse, with its Gastrosocial pension fund, which insures around 200,000 employees in the hotel and restaurant industry, has also spoken out against the BVG reform.

So for many of us, the reform will also bring very specific disadvantages over a long period of time.

The BVG21 reform has far-reaching financial implications, both for you as an insured person and for the entire occupational benefits system. According to the ASIP (Swiss Pension Fund Association), the total cost of the reform amounts to over CHF 11 billion over a period of 28 years; this will be used to finance the pension supplement for the transitional generation. One positive aspect from the younger generation’s perspective is the reduction in redistribution: lowering the conversion rate to 6% will reduce this by CHF 400 million per year.

The reform may also have a direct impact on your salary deductions if your pension fund previously used the full coordination deduction and you were therefore not insured. Due to the percentage structure of the coordination deduction, your salary may be insured in a pension fund for the first time. This will lead to higher salary deductions for you now, but also to a higher pension later on, especially if you work part-time or have a low income. For many companies, the reform means additional costs because they have to insure more salary income for occupational benefits.

The reduction in the conversion rate will be offset by a pension supplement for today’s 50-65 year olds.

The assessment of the reform varies: The Swiss Insurance Association (SIA) sees it as a “balanced and cost-compatible compromise for a sustainable pension scheme”. The ASIP, on the other hand, sees “more disadvantages than advantages” and criticizes the fact that the proposal fails to achieve the desired goals.

The aim of the BVG reform is to adapt occupational pension provision in Switzerland to current challenges. It brings with it both opportunities and risks:

So how should you vote in the BVG reform referendum? Do you want to set an example for the reformability of occupational pensions and accept the shortcomings despite the BVG reform referendum? According to the motto “better a bad reform than no reform”? Even if this means tangible disadvantages and new redistribution?

Many professional associations, with the exception of pension fund experts, have nevertheless voted “Yes!”. Or do you agree with the “No!” of the left-wing camp around the SP, Greens and trade unions, for whom the strengthening of part-time employees, recipients of low salaries and compensation for the transition generation does not go far enough?

I leave the answer to you. With the above facts, you as a voter can now carefully weigh up the arguments and make your decision based on your personal assessment of the pros and cons and your priorities for the future of occupational pensions in Switzerland.

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