SWITZERLAND - Switzerland has unveiled controversial new proposals in its draft guidance on BVG Ordinance II prohibiting registered pension funds from offering investment choice to their members.
In a move that has already drawn a sharp reaction from the industry, the Federal Council has stipulated that only non-registered pension funds may offer their members freedom to decide how to invest their funds.
Peter Zanella, benefits practice leader at Watson Wyatt in Zurich said: “They are actually forcing the employer to create a separate new non-registered pension fund in order to provide members with a choice of investment strategy.
“The basic philosophy here is to protect low earners who may not understand too much about risk. But there is no distinction between high earners and low earners.”
Equally as controversial, the council has also set the early retirement age at 60. All pension plans set up after 1 January, 2006 will have an early retirement age of 60.
Zanella said: “They have said that this proposal is based on the will of parliament and also on the global trend of higher retirement ages.
“But this is a strange provision. Why should you make such a restriction? Why shouldn’t you leave it open to each pension fund to decide what it wants its early retirement age to be.
“The main reason for this relatively high retirement age would be a fiscal one: the lower the early retirement the more you can pay tax-deductible contributions into the fund to reduce the actuarial decrease of benefits due to early retirement.”
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