Reform of occupational pension provision (BVG/LPP 21)

The following changes are envisaged in the BVG/LPP reform:

• Lowering the minimum conversion rate from 6.8% to 6.0%
• Lowering the entry threshold from CHF 22 050 to CHF 19 845
• Altering the coordination offset from the fixed amount of CHF 25 725 to a variable amount of 20% of the AHV/AVS salary (up to max. CHF 17 640)
• Reducing retirement credit rates from four to two, namely 9% for the 25–44 age category and 14% for the 45–65 age category (currently 7% for 25–34; 10% for 35–44; 15% for 45–54; 18% for 55–65).
• Transitional benefits for those retiring during the first 15 years after entry into force:
  
  • Full pension supplement up to max. retirement savings of CHF 220 500.
    
    • CHF 2400 for the first five cohorts
      
    • CHF 1800 for the following cohorts
      
    • CHF 1200 a year for the last five cohorts
      
  • Insured persons with retirement savings of CHF 220 500 to CHF 441 000 are entitled to a supplement that is reduced incrementally depending on the amount of retirement savings. For this purpose, the Federal Council will draw up a degressive scale for determining the pension supplement.
    
  • No pension supplement for retirement savings over CHF 441 000.
    

What are the likely medium- to long-term implications if the BVG/LPP reform is adopted?

• Tangible improvement in statutory contributions, especially for part-time employees and people working multiple jobs.
• Higher savings contributions due to stronger savings process (adjustments to the coordination offset and savings scale), especially for lower incomes.
• Around 70 000 additional insured persons under the BVG/LPP due to the lower entry threshold.
• Lower cross-subsidisation of current pensions due to lower minimum conversion rate.
• Better interest on retirement savings possible due to lower cross-subsidisation requirement.
• Short term: pension losses caused by the reduced minimum conversion rate compensated by pension supplements for 15 cohorts.