In this article
Key points
- The reform planned to lower the BVG/LPP conversion rate from 6.8% to 6%.
- To compensate: a lower entry threshold, a coordination deduction proportional to salary, simplified retirement credits.
- Transitional compensation was planned for insured persons aged 50 and over.
- Put to the vote on 22 September 2024, the reform was rejected: the current rules remain in force.
The reform of the Occupational Pensions Act (BVG/LPP) in Switzerland will be put to the vote next autumn (2024).
It aims to modernise and adapt the Swiss occupational pension system, which forms the 2nd pillar of the pension system. It is therefore of great importance for the sustainability of our pension system in Switzerland.
Here are the key points of this reform:
Lowering the conversion rate
The conversion rate, which determines the amount of the pension based on the accumulated capital, will be lowered from 6.8% to 6.0%. This means that, for the same accumulated capital, pensions will be slightly lower. This reduction is necessary to take account of increasing life expectancy and the situation on the financial markets, whose returns are no longer sufficient to maintain this rate.
Strengthening the savings process
The revision provides for lowering the entry threshold for occupational pension provision and introducing a coordination deduction proportional to salary. It also provides for simplifying the retirement credit rates (pension contributions).
These three measures aim to increase final retirement assets and thus to offset the reduction in the conversion rate over the long term. They are also intended to provide better cover for low salaries and part-time work, and to reduce the social security costs of working people over 55.
The three savings measures
Table 1| Measure | Today | With the reform |
|---|---|---|
| Entry threshold | CHF 22’050 | CHF 19’845 |
| Coordination deduction | Fixed amount of CHF 25’725, regardless of the level of employment | 20% of the AHV/AVS salary |
| Retirement credits | 4 age brackets, higher cost from age 55 | 2 age brackets, higher cost for people over 55 eliminated |
Retirement credits by age
Table 2| Age | Today | With the reform |
|---|---|---|
| 25 to 34 | 7% | 9% |
| 35 to 44 | 10% | 9% |
| 45 to 54 | 15% | 14% |
| 55 to 65 | 18% | 14% |
Compensation for insured persons close to retirement
To avoid a drastic reduction in pensions for people close to retirement, transitional compensation is planned for insured persons aged 50 and over at the time of the reform.
Conclusion
The 2024 BVG/LPP reform is therefore designed to ensure the long-term financial sustainability of the 2nd pillar of Swiss pension provision, taking into account demographic and economic developments.
Patrick Ballaman, Assidu
Like any reform of this kind, it is giving rise to debate and discussion about its short- and long-term impact on insured persons and companies.
The debates will focus mainly on the reduction of the conversion rate, even though it is necessary. This rate must be in line with life expectancy.
Partner · Back Office Director, Romandy · Social Insurance Specialist with Federal Diploma of Higher Education
