Occupational pension
BVG reform: what are the consequences of the referendum for the second pillar?
The electorate rejected the BVG 21 reform at the ballot box. So what’s next? Find out here what’s behind the reform.
Content:
Content:
- The Swiss people rejected the reform.
- Pillar 2 was to be reformed due to funding problems.
- The BVG reform at a glance.
- The Swiss people voted on the controversial reform on 22 September 2024.
- To the conclusion
A reform of the BVG (Federal Law on Occupational Retirement, Survivors’ and Disability Pension Plans) has been under discussion for years – also in connection with the OASI 21 reform, which has now come into force. In March 2023, Parliament approved the BVG 21 reform package. A referendum was held against the planned reform. The Swiss people rejected it at the ballot box, however. We explain what this means and what will happen next.
The planned changes to the BVG reform:
- The minimum conversion rate was to be lowered from 6.8 to 6 percent.
- The entry threshold above which compulsory insurance applies was to fall from CHF 22,050 (as at 2024) to CHF 19,845.
- The coordination deduction was to be changed from a fixed value to a relative value. After 20 percent has been deducted, the remaining respective salary amount was to be insured.
- The system of retirement credits would have been simplified. There would only have been two levels instead of four. The percentage rate for the age group of 25 to 34 years old would have been increased slightly, and it would have been reduced slightly for the other age groups.
- Certain people who were to retire in the 15 years after the reform came into force would have received a pension supplement.
Together with the first pillar, the second pillar of old-age provision is intended to ensure that all pensioners can maintain their accustomed standard of living in old age. In theory, the first two pillars replace around 60 percent of the final income after retirement. Occupational pension provision, also known as the pension fund or BVG, plays a key role here.
Pensions for women are about a third lower than for men. This is also known as the gender pension gap.
Around 1.7 million people in Switzerland received an OASI (old-age and survivors's insurance) pension in 2022. On average, this amounted to CHF 1,862 per month for men and CHF 1,883 for women. In the same year, almost 900,000 people drew a pension fund pension, which amounted to an average of CHF 2,353 per month. For many recipients, the second pillar is therefore usually of greater financial importance than the first pillar.
This is especially true for men. They are more likely to receive a pension fund pension and also receive a higher pension than women. This head start is considered to be a major reason for the fact that women’s pensions are around a third lower overall, also known as the gender pension gap. Occupational benefits insurance is mandatory for all employees above the entry threshold. Self-employed persons can take out voluntary insurance. Around 4.6 million employees are currently saving retirement assets in the second pillar. The money is invested using the capital cover method, mainly in shares, bonds and real estate.
How is your retirement provision?
The free UBS Pension Check gives you a reliable overview of your current financial situation. Based on the results, you can optimize or increase your private retirement savings.
The BVG reform rejected by the electorate contained five elements that would have meant changes for insured persons both in the savings phase and in the later withdrawal phase. In addition, once it come into force, the group of persons subject to compulsory insurance would have been expanded, which would have improved pension provision for people with a low income. These include part-time employees or those with multiple employers and women in particular.
Element | Element | Without reform | Without reform | With reform | With reform |
|---|---|---|---|---|---|
Element | Conversion rate | Without reform | 6.8 percent | With reform | 6.0 percent |
Element | Entry threshold | Without reform | CHF 22,050 | With reform | CHF 19,845 |
Element | Coordination deduction | Without reform | CHF 25,725 | With reform | 20 percent of the annual salary subject to OASI contributions |
Element | Retirement credit rates | Without reform | 25–34 years: 7 percent | With reform | 25–45 years: 9 percent |
Element | Pension supplements for the first 15 cohorts after the reform comes into force (transitional generation) | Without reform | none | With reform | For insured persons with a retirement savings of less than CHF 220,500: the first five cohorts: CHF 2,400 per year |
Do I have a pension gap?
If the benefits from pillars 1 and 2 are not enough to maintain your desired standard of living in retirement, you’ll need to save more. Find out how much today.
The BVG reform was controversial and was clearly rejected. We list the most common arguments put forward by both supporters and opponents of the reform.
Arguments in favor of reform:
Arguments against reform:
Now that the Swiss electorate has rejected the reform and there is still a clear need for change, it’s time to review the situation. The federal government has a duty to prepare a new proposal, and must ensure the arguments for and against the reform that was rejected are taken into account in the debate. Nothing will change at present for insured under the mandatory BVG insurance. For pension funds with extra-mandatory benefits the conversion rates could nevertheless fall even further. However, the current discussion about pension reform offers a good opportunity to take a close look at your own pension provision and check for any gaps – be it in the first, second or third pillar.
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