Important year-end information
Swisscanto Flex Collective Foundation
The board of trustees has decided to leave the technical interest rate for the calculation of the pension obligation at 2.25%. The conversion rate on the other hand will be reduced from 5.60% to 5.40% from 2021. The conversion rate at age 65 for men and 64 for women will be as follows in the coming years:
*The BVG conversion rate is still 6.80%, but only applies to what is known as the BVG minimum capital. All-inclusive pension funds can apply lower conversion rates.
Why are conversion rates always being reduced? For years, interest rates on the investment markets have hovered around zero percent. Interest rates have still not started to rise in Switzerland. Investment performance is also rather critical at the moment, and life expectancy in Switzerland continues to rise. Although it is a good thing that we are growing ever older, this also means that pensions have to be paid for longer than originally planned. And a prospective partner's pension for partners who also live longer and are sometimes also younger than the original pensioner is also insured. This inevitably means that low interest rates combined with increased life expectancy will cause an imbalance if nothing is done to prevent this. This imbalance is often described using the term 'redistribution' in the occupational pensions business. This is why it is necessary to adjust the conversion rate. To avoid a reduction in the retirement pension and maintain the level of benefits, more can be paid into the pension fund. Insured persons have the option, for example, to make voluntary purchases and can deduct the full purchase amount from their taxable income for federal, cantonal and municipal taxes. Or their savings plan can be strengthened with the consent of the employer by increasing the savings credits.
General changes to social insurance
The mandatory retirement assets must earn at least the BVG minimum interest rate. This minimum interest rate is determined every year by the Federal Council on recommendation of the BVG Commission. As in 2017 and 2018, the Federal Council decided to leave the minimum interest rate for 2019 at 1%. AHV/IV pensions will be adjusted to current price and wage inflation from 1 January 2019. The minimum AHV/IV pension increases by CHF 10. The parameters for occupational pensions will therefore change as set out below.
The new thresholds will affect your pension plan according to the structure of your pension plan. Please do not hesitate to contact your customer advisor if you require further information.