Switzerland is once again being called upon to make a decision on retirement provision. This time it concerns the second pillar of our three-pillar system: occupational retirement provision (BVG), often simply referred to as a pension fund.
The 2nd pillar has been under pressure for years. Together with AHV, its intention is to secure the standard of living you are accustomed to in old age. However, financing the BVG minimum benefits, which are insured under BVG mandatory coverage, has become difficult. The population is getting progressively older. In addition, interest rates remain low, which reduces the return on capital invested by the pension funds. To ensure that pensioners' pensions last until the end of their lives, they must increasingly be financed through investment income that would otherwise be credited to active employees. There is a redistribution from young to old that is contrary to the system.
The planned BVG reform aims to stop this redistribution: the 2nd pillar is to be financially stabilized. The Swiss electorate will vote on the proposal on September 22, 2024. If it is adopted, a lot will change for both employees and employers. For example, the reform also provides for better pensions for people with low incomes. This increases employers' contributions to the pension fund.
These are the central objectives of the planned reform.
| Age |
Retirement credits today | Retirement credits after BVG reform |
| 25 - 34 years | 7 % | 9 % |
| 35 - 44 years | 10 % | 9 % |
| 45 - 54 years | 15 % | 14 % |
| 55 - 64 years | 18 % | 14 % |
Source: FSIO, reform of occupational retirement provision
If the Swiss electorate approves the reform, businesses employing a significant number of insured persons with a BVG minimum plan, or slightly better benefits, will be particularly affected by the measures. In terms of employees, this is likely to be no more than 15 percent of all insured persons. People who retire in the first 15 years after the reform takes effect have the opportunity to receive a lifelong pension supplement of up to CHF 200 per month to compensate for the lower conversion rate. The decisive factors are the year of birth and the amount of retirement savings capital.
If the pension fund reform is adopted, employers should familiarize themselves with the changes at an early stage. This will ensure they are prepared and know what challenges to expect.
SMEs, for example, would do well to plan their new budget early on. This is because the adjustment of the coordination deduction and the lower entry threshold mean that more employees will be covered by occupational retirement provision. In addition, employer and employee contributions will be rising for most age and salary groups. Both will lead to higher costs.
Employers would now be allowed to reduce the savings contributions of their employees over 45 years of age to 14 percent. The motivation: a reduction in non-wage labor costs. However, SMEs could also choose to shield employees from a potential reduction in savings resulting from the reform by continuing to pay higher employer contributions. They could advertise this as a financial "bonus" – an interesting option in times of skills shortages.
In the event of a "yes" on the BVG reform, however, companies will also have administrative considerations to deal with – for example, whether internal regulations and employment contracts need to be adjusted to comply with the new conversion rate and the new salary contributions.
What SMEs should definitely do: inform their employees of any changes ahead of time. Employers should be transparent about how the reform will affect their employees' retirement provision. This clarification is both a duty and an opportunity. According to the "Fairplay Study" by Zurich and Vita, 52 percent of employees believe it is fair to receive regular information about occupational retirement provision. This gives companies the opportunity to position themselves as a dedicated employer.
