Minimum pension interest rate to rise to 1.25 percent next year
Published: Wednesday, Nov 1st 2023, 15:31
Updated At: Thursday, Nov 2nd 2023, 00:54
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The Federal Council will raise the minimum interest rate for occupational pension plans by 0.25 percentage points to 1.25 percent from January 2024. It took this decision on Wednesday.
The minimum interest rate is used to determine the minimum interest rate that must be paid on the pension assets of insured persons under the compulsory scheme in accordance with the Swiss Federal Law on Occupational Retirement, Survivors' and Disability Pension Plans (BVG). Decisive for its level is the development of the return on federal bonds and additionally on shares, bonds and real estate.
In this regard, the Federal Council wrote in a statement on Wednesday that the interest rate on federal bonds had risen significantly in 2022. While the interest rate on ten-year federal bonds was still minus 0.13 percent at the end of 2021, the interest rate had risen to 1.09 percent by the end of September 2023.
While the increase in the value of stocks and bonds was negative last year, values have improved again this year. However, the negative development of bonds has "so far only been partially relativized" by the recovery of the markets in the current year.
Overall, the financial situation of the pension funds is stable. Despite the unfavorable financial market development in 2022, a slight increase in the minimum interest rate is justified in view of this stability and the higher interest rate.
Currently, higher inflation and the associated loss of purchasing power are affecting the performance of the second pension pillar. However, as interest rates have also risen, the expected returns and the ability of pension funds to restructure have improved.
With its decision, the national government is following a recommendation made by the Federal Commission for Occupational Pensions (BVG Commission) in September.
Federation of trade unions demanded 2 percent
The Swiss Federation of Trade Unions (SGB) criticized the Federal Council's decision. The 0.25 percent increase is "significantly below the current inflation rate," it wrote in a statement. This means that the retirement capital of the insured continues to lose value and the interest rate turnaround does not reach the working population.
The SGB wanted an increase to 2 percent. According to the Federal Council, the Fédération des Entreprises Romandes and the Kaufmännische Verband were in favor of 1.5 percent. The farmers' association and the trade association demanded 1 percent and the employers' association 0.75 percent.
The Swiss Insurance Association SVV also voiced criticism on Wednesday. It would be appropriate to reduce or at least maintain the current rate, it wrote in a statement. The BVG minimum interest rate - "especially in conjunction with the excessive BVG minimum conversion rate" - has been too high for years.
Travailsuisse, the umbrella organization representing employees, was pleased with the BVG Commission's recommendation in September. At the time, the association wrote that it finally took the interest rate turnaround into account.
The interest rate on retirement assets that are not subject to the compulsory pension scheme, i.e. that belong to the non-compulsory occupational pension scheme, is not decided by the Federal Council but by the supreme body of the pension scheme.
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