The second pillar is a bottomless pit
The second pillar needs to be reformed. The money saved up to retirement is no longer enough to finance pensions until the end of life. With every pensioner who retires, the pension fund incurs a loss. It is currently financing these losses with investment income that was actually intended to earn interest on the retirement assets of those in employment. This reduces their growth in value, resulting in lower retirement assets at the time of retirement. The longer pension payment period due to longer life expectancy must therefore also be financed with less retirement capital in future, which leads to even higher losses. The pension funds will have to withhold an even greater proportion of the investment income from the working population. A vicious circle that leaves only one question unanswered: When will the system collapse?
No solution because lower pensions are a taboo
The need for occupational pension reform is undisputed. However, lowering pensions is a taboo. Too many people see the second pillar as a pension scheme that must be guaranteed by the state. This is despite the fact that the second pillar is an occupational pension scheme and not a state pension scheme, as is the case with the AHV.
New sources of funding do not solve the problem
So there is no other option but to find new sources of funding for the ever-increasing pension losses. It is therefore not surprising that the social partners’ current proposal is heading in precisely this direction. Employees are to pay an additional salary deduction of 0.5 per cent, which will go directly to pensioners. In return, pensions will be reduced. The pension conversion rate will be lowered from 6.8 to 6 per cent. The problem with this proposal is that the salary deduction is unlimited in time, but the pension supplement to cushion the pension reduction will evaporate within 15 years. This means that those who pay in today cannot expect to receive anything in the future when they retire, unless those who are then in employment are prepared to pay even more in order to receive nothing later. As you can see: The vicious circle remains in place even with this reform proposal.
Goal: Keep income and expenditure in balance
As the young people who are to be asked to pay are preoccupied with the climate anyway, it is still possible that this proposal will go through. Nevertheless, we would like to point out a real way out of the BVG plight. It starts where the dog is buried. Basically, the second pillar is a tried-and-tested pension instrument that does not need a mini-AHV. It supplements the first pillar, which works on a pay-as-you-go basis, with a second system, the funded system. What is ailing the occupational pension scheme is the political promise of benefits. The calculation simply cannot work out if income falls due to lower capital market returns and expenditure rises due to longer life expectancy. It must be possible to keep income and expenditure in balance.
Towards the goal: Let’s build a new BVG building!
Let’s be honest. If the SNB were a house, we would tear it down and build a new one. But that’s not so easy, of course, because people have been living in this house for years and you can’t put them out on the street. This situation reminds me of my maternal grandparents. They didn’t want the old farmhouse, where they grew up and raised their eight children, to be demolished and a new one built.
Her eldest son was not deterred by this. He built a new house anyway. But he left the old house standing for the time being. He left it to his parents to move into the new house once the construction was complete. That’s exactly what I would do with the occupational pension scheme. We should build a new BVG building that leaves it up to the pension funds to define the level of benefits. Each company should then be able to decide for itself whether it wants to move its employees into the new BVG building or not.
Pull whoever wants!
In the new BVG house, the pension funds will endeavour to offer the best possible benefits in order to win over as many companies as possible. If they offer poor benefits, they will lose market share. If they offer benefits that are too high and cannot be financed sustainably, their credit rating (coverage ratio) will fall, which is already an important criterion when choosing a pension fund partner. Put simply: the market is at play. As before, the legislator can set the minimum savings contributions. But it must be careful not to dictate the benefits.
Politicians are doing their job and defining the accompanying measures
Finally, all that remains to be done is to regulate how a move from the old SNB building to the new modern SNB building can be organised. On the one hand, it must of course be regulated who makes such a decision. Obviously, it is the pension fund commission that decides where and how the company insures its employees in the current system. Then there is the question of what happens to the retirement savings accumulated before leaving the old BVG company. The simplest option in this respect is that the retirement assets already saved remain in the old BVG company and are converted into a pension at the time of retirement. In addition to this pension, insured persons whose pension fund committee has decided in favour of a change will receive a pension from the new BVG company on retirement.
Everything else, such as accompanying measures or, for example, the assumption of insurance cover in the event of death or disability, can be arranged with a little goodwill.