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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%

 
About Helvetia Baloise Helvetia Baloise is Switzerland’s largest multi-line insurer and one of Europe’s leading insurance groups. Every day, more than 22,000 employees work hard to support around 13 million customers with insurance, pension, and financial solutions. These customers range from individuals and small to medium-sized enterprises (SMEs) through to international customer groups, which also benefit from areas such as specialty insurance and reinsurance. Headquartered in Basel, Switzerland, Helvetia Baloise operates in eight European markets and in global specialty markets, combining its strong Swiss roots with a clear international focus. Helvetia Baloise creates safety and security and opens up opportunities, both today and in the future. Through profitable growth and business operations that are geared to long-term stability, we create tailored solutions for our customers, provide an attractive and reliable investment for our shareholders, promote strong partnerships and offer rewarding career prospects for our employees. Helvetia Baloise Holding Ltd shares (HBAN) are listed on the SIX Swiss Exchange.
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