BVG reform: What happens next after the no vote in Switzerland – SWI swissinfo.ch

Once again, a pension reform has failed at the ballot box. Voters have overwhelmingly rejected the BVG proposal. It is a triumph for the Left, but it comes at the expense of their own goals.

This content was published on September 22, 2024 – 00:00

Marc Leutenegger

Critical journalism is not a product of a free society, but its prerequisite – it is with this conviction that Marc Leutenegger writes about politics and social institutions. For 15 years he did this for a local newspaper in Zurich, and in November 2020 he moved to swissinfo.ch as head of the trilingual Swiss editorial team.

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Swiss pension policy has returned to its old mode of existence: standstill. This weekend, the left is celebrating a clear no to the BVG reform; its “pension rip-off” campaign has caught on. “Pay more, get less pension” is not what most people wanted.

What the no to the BVG reform means

First: The population has once again rejected an adjustment of the conversion rate to reflect increased life expectancy, from 6.8 to 6 percent, for the third time.

The result: Working people must continue to cross-subsidize the pensions of the newly retired, which are mathematically too high. However, this only applies to those who are insured in the so-called compulsory system, which according to the federal government amounts to around 12 to 14 percent.

Second: The Left was prepared to sacrifice other goals in order to maintain this redistribution. Specifically, improving the situation for part-time workers and low-income earners through a system change in the coordination deduction.

The result: This widely supported part of the failed BVG reform, which would be important especially for many women, will now go through further loops in parliament – valuable time will pass during which those affected will save little or no retirement capital.

Third: Also off the table for the time being is a more even distribution of savings contributions over the working career; this would have resulted in slightly lower deductions for the older generations and slightly higher deductions for the younger generations.

The result: The problem that older employees are disproportionately expensive for companies remains. The solution has been postponed to an uncertain future following the rejection of the BVG reform.

The reactions in Switzerland

After the population’s clear no to the BVG proposal, the winners are becoming more and more covetous.

The parliament is politicizing without considering the people, writes the Swiss Federation of Trade Unions and calls for a change of course. Specifically, “higher interest rates on retirement savings and compensation for inflation on pensions.”

SP and Green in turn, demand the introduction of solidarity-financed childcare and care credits, i.e. more redistribution in the second pillar.

The tone of the defeated bourgeois parties varies. FDP accuses the Left of having prevented better pensions for low earners, especially women, with a “fact-contradictory campaign”. This shows the Left’s real agenda: it does not want to modernize the second pillar, but to abolish it.

This interpretation is shared by the Employers’ Associationwho announces that he will oppose any attempt to expand the AHV.

Die Not criticises the opponents’ campaign, but maintains that they want to continue to work constructively towards the modernisation of the second pillar.

Even more serene is the SVP: The no to the BVG reform should also be interpreted as a “no to the irresponsible expansion plans of the SP”. The no is a yes to the status quo. That must be accepted. The party is also explicitly opposing the demands already put forward by the SP and the Greens.

The non-partisan women’s umbrella organisation is disappointed with the outcome of the vote Alliance F“Switzerland is thus missing a long-fought opportunity to finally improve the pension situation of women in the country.”

The reasons for the failure of the BVG reform

If one had to name just one reason for the failure, it would be the complexity of the BVG proposal. The second pillar system is a closed book for many. This creates fear. And the unions knew how to allay this fear with their Campaign External Link to use for your own benefit.

But then the BVG proposal was perhaps too packed. Parliament and the Federal Council did not make the mistake of putting both pension systems before the people in a single reform, a plan that had last failed in 2017 – and in the twenty years before that.

However, with the adjustment of savings contributions in the different years, the number of those directly affected has become quite large.

And finally, after a boom in the financial markets at the time of the vote, the pension funds were simply in too good a position. The average coverage ratio, which indicates the extent to which the funds can meet the claims of the insured, had risen to over 120 percent for private pension funds in the second quarter of 2024 (according to SwisscantoExterner Link). The public coffers were also comfortably capitalized. System errors can be afforded.

Despite everything, we can look forward to the post-election polls, especially the votes of pensioners. They could have given their blessing to the BVG reform from the spectator’s seat.

Because their pensions are guaranteed, according to the iron rule in Switzerland. Nevertheless, a large group of pensioners rejected the reform – a conservative gesture without personal involvement, which was representative of the Swiss ReformstauExterner Link stands.

What happens after the no?

Because the conversion rate is mathematically too high, only those funds that manage little or no extra-mandatory capital are forced to cross-subsidize, some pension fund experts expect the sector to adapt to the policy. Specifically, that there will be a further move away from pension plans with purely mandatory benefits.

In the supplementary pension scheme, there are no statutory minimum pensions, so the pension funds can make a mixed calculation and pay out correct pensions based on life expectancy.

From a societal perspective, such a change would have the advantage that minimalist pension solutions would be less common and stingy employers would be held accountable. In this scenario, foregoing political reform would result in insurance reform.

The second major issue, part-time workers and low-income earners, still requires reform. The discussion is likely to be taken up again in Parliament.

But resistance from business circles is to be expected, because an isolated proposal lacks the counterpart of a realistic conversion rate. According to this interpretation, it would be paradoxical to expand the obligation if it is not sufficiently financed.

The bitter realization of this September 22nd

The idea of ​​cross-subsidizing old-age pensions continues to be popular with the people, not only in the AHV, where it is consistent with the system, but also in the BVG. A recent study by the University of Lucerne found that 54 percent agree with redistribution from rich to poor in the AHV. 42 percent would also approve of such a thing in the BVG, where it would be alien to the system.

However, the figures should be treated with caution. The disillusionment that the discussion about the financing of the 13th AHV pension has brought has not yet been incorporated into the results. And, as control questions showed, over 50 percent of those surveyed for the study had significant gaps in their knowledge.

This bland conclusion remains even after this voting Sunday: After half a dozen referendums on old-age provision in the last few years alone, the two most important social insurance schemes in Switzerland, and in particular the BVG, remain completely misunderstood by many.

What is the Swiss population’s knowledge of the BVG reform? A non-representative street survey by “Blick” provides a deep insight:

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