There are a lot of benefits to people having a better pension (and most people won’t invest by themselves).
It also saves taxes due to eventually lowering the needs for social benefits payouts.
This is not very representative, as it was discussed in some threads. If you have 1e and are leaving your job, you have to liquidate that part of portfolio no matter what. I can imagine few schemes to circumference that problem, but I guess most people prefer to not bother and stay in cash. Arguably, if you have 1e, you probably also have a significant post-tax portfolio.
2 Likes
The link above has a study done by PWC which shows the asset allocation of 1e plans in Switzerland. It says about 37% is in equities.
I think Dutch pension fund is considered the best in Europe and is also going through a reform. I read sometime back that they raised the equity exposure limits a bit too. Perhaps something to learn and leverage.
I also think all of us should try to not view pension funds with the same lens as our stock portfolios. Pension funds need to provide guaranteed income to the retirees. This is not so easy with a very high equity allocation given the volatility. This is why pension funds have an asset allocation mandate.
When the move from defined benefits to defined contribution happened, it was also a bite the bullet moment. Many people were unhappy because that significantly reduced their retirement income. But it had to be done.
I agree that performance and returns could be improved and should be improved. Government is looking into reforms and hopefully things will improve. As I mentioned above CH has potential to improve its ranking in terms of pension fund regulation
1 Like
Well, it’s just a single example. However, in CHF terms it’s pretty much in line with the study @Abs_max quoted. I doubt people liquidating temporarily is a big factor, to me the numbers rather confirms even lots of well-earning people are skeptical about stocks.
So it might be quite justifiable to mandate contributions to both pillar 1 and pillar 2 without self-selected strategies. Up to a point, at least.
Anyway, that’s more to comment on some previous posts. The reform itself, as I understand is focused on life-time contributions of average earners, as well as to extend coverage to lower incomes.
1 Like
Honestly, the extended coverage for lower incomes seems sorely needed to me and I’m willing to eat a lot of more unsavory things to have it happen.
The minimal salary and coordination deduction, in particular, make no sense to me. The idea of “you’re so poor that inadequate coverage by the 1st pillar only is enough to maintain your very low standard of living so your employer doesn’t have to pitch in” seem alien to me.
13 Likes
It’s what Luxembourg is doing. Each the employee, employer and government pay 8% of the salary into the pot of “Caisse nationale d’assurance Pension”. This results in a minimum monthly pension of EUR 2,244.82 as of Jan 1st, 2024. The maximum is “5/6 of five times the reference amount of 2,085 euros at index 100”. A bit opaque… or maybe just a translation issue.
1 Like
That example though… 35k emergency fund? seems overblown to me.
6.8% is far too high. People on average live far longer. 6.0% is still too high.
2 Likes
Well according to the 20min poll this revision will be grounded.
It is way too complicated. And campaigning for a no is easy by simply focusing on “6.8% → 6.0%, less pension bad”.
After reading up on the vote, I realized that the 6.8% conversion rate is not respected by the vast majority of pension funds. Mine has a rate even lower than 6%…
I think this reform is necessary, but with the recent news about the FSIO’s miscalculations, I’m afraid this vote won’t pass just out of distrust of the figures.
1 Like
The change is only on the mandatory part (the one that can be affected by the law). From what I read 60% of employees are insured over the minimum.
I guess that will mean further depressing the over mandatory conversion to fund the way too high rate on the mandatory pensions.
1 Like
That isn’t how it works. The 6.8% applies to the mandatory part. Most people have AGH that is above the mandatory part and the pension funds are allowed to have a lower Umwandlungssatz then.
2 Likes
This is something I always get confused. How does “above mandatory part” and “lower than minimum” fit together?
The extra-mandatory part is much larger than most realize, as it can come from various sources:
- a pension fund’s return above the minimum return
- employer’s contributions higher than the minimum
- voluntary contributions
- contributions before turning 25
- part of the salary above 88’200
A pension fund has to pay 6.8% of the mandatory part per year as a pension. There are two ways how to deal with the extra-mandatory part:
- pay 6.8% on the mandatory part and a much lower rate (e.g. 5%) on the extra-mandatory part
- don’t split the money but instead set one rate for the entire thing (“umhüllender Satz”), which can be lower than 6.8% but the resulting pension must not be lower than 6.8% of the mandatory part
12 Likes
Thanks I guess. 
That makes sense, thanks for the explanation!
Another source is when you start paying 2nd pillar before the age of 25.
It’s actually more like 85%.
Same thing in Nationalrat and Ständerat though… 
4 Likes