Paul Seewer
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Claude Chatelain, business journalist and publicist.
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Swiss Life announced this week that it would lower the conversion rate for full insurance. In other words, with the model in which the insurance company bears the investment risk alone and always has to guarantee full coverage.
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After Axa said goodbye to this full insurance, Swiss Life’s market share rose to 45 percent. Around 350,000 employees of small and medium-sized enterprises (SMEs) have to accept a pension loss of two to four percent.
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On average, we are all getting older, but the contributions that we pay into the pension fund, the so-called retirement credits, remain the same. So it is only logical that pensions should be lowered.
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But the following causes frowns: Swiss Life is also lowering the conversion rate on the mandatory part from 6.8 to 6.5 percent, although the statutory minimum conversion rate is 6.8 percent. How is that possible?
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To illustrate this, imagine it this way: The entire individual pension fund capital is in two pots. The money that has been saved within the legal minimum is in one pot: the mandatory credit. The second pot contains the money that has been saved beyond the legal minimum: the extra-mandatory credit.
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These capitals are converted into a pension at different rates: The compulsory part must, as mentioned, be converted at least at a rate of 6.8 percent. For every CHF 100,000 that is CHF 6,800 a year. So say the law.
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To this end, the pension fund is free to determine the rate at which the extra-mandatory assets are converted. This rate is much lower than can be actuarially justified. This is due to the fact that the mandatory rate of 6.8 percent is far too high.
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Company pension funds and in some cases also autonomous collective foundations therefore apply a uniform conversion rate, which is often between five and six percent. All you have to do with a shadow bill is to ensure that 6.8 percent of the money in the compulsory pot is converted into a pension.
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If Swiss Life applies a lower conversion rate on the mandatory part than the one prescribed by law, as others do, by the way, this causes confusion at first. With a Buebetrickli, Swiss Life wants to reduce the unpleasant redistribution from employees to pensioners, but assures that the statutory minimum benefits will be met. I would need more than this column to explain in an understandable way how it works.
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To cut a long story short: there is another stage that shows how the system of
second pillar is taken ad absurdum and made even more complex and intransparent than it already is.
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–Published: 04/04/2021, 9:44 a.m.
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