Suggestions for BVG reform: How they will affect our pensions

According to the latest study by Credit Suisse, the pensions of the coming generations will be significantly lower than current pensions if nothing is done. Social partners are in the process of discussing possible reforms. This overview study assesses the reform proposals and calculates the monetary impact of the individual solutions.

It is common knowledge that the Swiss pension system must undergo reform. In their new study, Credit Suisse economists calculate the specific impact that maintaining the status quo will have on future pensioners. They also present solutions. There are reform proposals that could mitigate the problem, although they are largely subject to political decisions. Credit Suisse economists assessed these proposals in terms of their financial impact.

Private pension provision becomes more important

One thing is clear: The private pension provision will continue to grow more important, regardless of any future political decisions. You can find an overview of the steps everybody can take to secure their retirement here: Pensions are falling: seven suggestions for your private pension provision.

Proposed reforms

Increasing the retirement age

It's an indisputable fact: If you save longer, you'll have more pension assets. Many countries have increased the retirement age (or plan to do so) in response to increasing life expectancy. While most European countries are considering a retirement age of 67 or 68, the Swiss Federal Council currently only has in mind to harmonize the retirement age at 65 for both men and women. This despite the fact that Switzerland has a comparatively high life expectancy.

The Swiss retire earlier compared to most other European countries

In a European comparison, the Swiss retire earlier despite higher life expectancy

Projected retirement age in 2050*

* Norway and Sweden have abolished their retirement ages; the retirement age range is between 62 and 75 in Norway and between 61 and 67 in Sweden (the reference values for a 100% pension are 67 and 65, respectively).

Source: F.A.Z. (2016), based on statistics from the Finnish Centre for Pensions, Credit Suisse

Overview of currently proposed BVG reforms

Reforms focus on four key measures

  1. Reduction of the minimum conversion rate
  2. Increase of the contribution rates
  3. Reduction of the coordination deduction
  4. Compensation measures for transitional generation

Everyone agrees that a reduction of the minimum conversion rate is overdue. The current minimum conversion rate is based on a life expectancy that was realistic in 1985. However, life expectancy has increased significantly in the past few decades and will most likely continue to rise. Increasing the contribution rates as well as reducing the coordination deduction are measures that would increase BVG pensions for the majority of insured individuals. For the transitional generation, who will be first to be affected by any reforms, the social partners envision compensation measures. However, when it comes to financing these compensation measures, opinions are divided.

The most effective measure is not part of the reform package

A prompt, gradual increase to the retirement age is one of the most sustainable approaches to ensuring retirement benefits. This, however, is still not on the agenda of any social partner.