Adjustment of conversion rates for occupational pensions

Basel, January 26, 2021. The conversion rate for the annuitisation of compulsory retirement assets, which is set by politicians, no longer reflects the increased life expectancy or the macroeconomic conditions. In the ongoing environment of low interest rates, these regulatory requirements make it harder to generate the necessary returns. This is putting ever greater pressure on pension funds. Baloise still fully supports the comprehensive BVG insurance model. However, a phased lowering of conversion rates between now and 2023 is required in order to reduce the redistribution of assets from people in work to retirees and to safeguard pensions over the long term.

Basler Insurance, with its Bâloise collective foundations, still fully supports the comprehensive insurance model for occupational pensions because it is an appropriate solution for a large part of the Swiss economy; the Swiss Insurance Association estimates that around one in three employers have a comprehensive insurance solution. However, Baloise needs to adjust the configuration of occupational pension provision in view of the more challenging business and regulatory environment and the persistently low level of interest rates. Policymakers have spent years trying to find a solution to bring long-term stability to pension provision that will enjoy majority support. At the end of November 2020, the Swiss Federal Council published its dispatch on the reform of occupational pensions. The main change is the lowering of the conversion rate to 6 per cent. This and other measures should protect pensions, strengthen the funding base and improve the pension cover of part-time employees. The parliament will discuss the dispatch this year, and the hope is that a workable solution will be found quickly. Action is required, whatever the outcome.

Lowering of the conversion rate

The conversion rate for the annuitisation of compulsory retirement assets, which is set by politicians, was last adjusted in 2005. However, it no longer reflects the increased life expectancy. This means that the redistribution of assets from people in work to those drawing their pension will continue to increase. This process is often criticised and does not contribute to social equality. To counteract this redistribution and make the system fairer for policyholders who are still working, Baloise will progressively lower the conversion rates between now and 2023. It will continue to use the ‘splitting model’, whereby retirement pensions are calculated in a transparent manner separately for retirement assets from compulsory savings components and for retirement assets from savings components above the income threshold (Überobligatorium). The statutory minimum is guaranteed in any case. If, in a specific case, this cannot be achieved with the new conversion rates, Baloise will top up the affected retirement pensions and provide the guaranteed minimum benefits. 

The new conversion rates will be as follows:

  2021   2022   2023  
  From compulsory savings components From savings components above the income threshold From compulsory savings components From savings components above the income threshold From compulsory savings components

From savings components above the income threshold

Men, aged 65 6.80% 4.90% 6.56% 4.76% 6.29% 4.56%
Woman, aged 64 6.80% 4.80% 6.47% 4.69% 6.20% 4.49%

 

Contact

Portrait Nicole Hess

Nicole Hess

Media spokeswoman

Phone

+41 58 285 76 09

Email

media.relations@baloise.com

The Baloise Group is more than just a traditional insurance company. The changing security, safety and service needs of society in the digital age lie at the heart of its business activities. The 7,700 or so employees of Baloise therefore focus on the wishes of their customers. The best possible customer service, combined with innovative products and services, makes Baloise the first choice for people who want to feel ‘simply safe’. Located at the heart of Europe, with its head office in Basel, the Baloise Group is a provider of prevention, pension, assistance and insurance solutions. Its core markets are Switzerland, Germany, Belgium and Luxembourg. In Switzerland, with Baloise Bank SoBa, the Group also operates as a specialised financial services provider, offering a combination of insurance and banking services. The Group offers innovative pension products to retail customers throughout Europe from its competence centre in Luxembourg. Bâloise Holding Ltd shares are listed in the main segment of the SIX Swiss Exchange.

Other news

Baloise Asset Management

July 21, 2021

Capital increase of the Baloise Swiss Property Fund

Baloise Asset Management AG will conduct a capital increase of around CHF 135 million for the Baloise Swiss Property Fund from 10 August 2021 to 19 August 2021.

Mobility

July 15, 2021

Start-up "Parcandi" founded

Baloise has announced the founding of Parcandi, a corporate start-up initially developed as part of an internal innovation campaign. Parcandi connects drivers looking for somewhere to park to ...