Is there inflation compensation again?

July 22, 2019
Pension fund
At present, an inflation adjustment is not foreseeable. The following conditions must be met before inflation compensation can take place again.

Legal inflation adjustment

In accordance with the law, old-age pensions are adjusted in line with the pension fund's financial resources in line with price trends. To do this, the fluctuation reserves must be fully available, which is currently not the case.

Supplementary financing of pensions

It should also be noted that the previous retirement conditions corresponded to an implicit conversion rate of 7%. This included an interest rate promise of around 4%. The current conversion rate of 4.7% still implies an interest promise of 1.75%, which corresponds to the long-term return expected by the pension fund. Due to this lower yield and increased life expectancy, the actuarial reserves of the former pensions had to be continuously refinanced. Over the past ten years, the pension fund has increased the pension capital of pensioners by around CHF 260 million. Accordingly, this amount could not be used to build up the value fluctuation reserves or to pay higher interest on the retirement assets of the active insured. Moreover, the active insured will not receive any general inflation adjustment in the form of wage increases.