Pension fund funds must yield more: the minimum interest must rise to 1.25 percent

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In October, the Federal Council will decide under which conditions our pension assets in the pension funds must at least yield interest next year. An important provisional decision was taken today: the minimum interest rate will be raised from 1 to 1.25 percent. This is what the Federal Commission for Occupational Pensions (BVG Commission) under President Christine Egerszegi (75) proposes to the Federal Council.

In the committee, employers, insurers and trade unions discuss how much interest must be paid in the future on our assets in the second pillar. And opinions varied widely: the committee members’ suggestions ranged from 0.5 to 2 percent. Several variants were voted on.

“At the final vote, a clear majority voted in favor of 1.25 percent,” the commission wrote in a statement. In doing so, it takes into account in particular the significant increase in interest rates as a result of the increase in inflation.

The unions insist on 2 percent

The unions are 1.25 percent too few. They are anything but satisfied with the Commission’s proposal and are calling on the Federal Council to raise the minimum rate to 2 percent. “The financial situation of the pension funds is good due to the rise in interest rates and the returns are also positive,” says Urban Hodel (37) of the trade union federation.

The minimum interest rate has been lagging behind the actual generated returns for years. “After 15 years of declining pension funds due to low interest rates and excessive costs, this should be the end.”

The interest is of enormous importance to future retirees. Over the course of a working life, this, together with the conversion rate, determines in the long term how high the pension fund’s monthly pension will be in the future: those who have saved more will receive more.

Inflation eats away at credit

Since 2017, the minimum interest rate for the mandatory deposit in the second pillar has been 1 percent. Until 2002 this was still 4 percent. Over the past ten years, the average interest rate on all deposits has been 2.34 percent. If you factor in inflation, it becomes clear that the assets have lost their real value over the last three years.

The fact that the minimum rate is now only being increased by a quarter of a point is seen by the unions as fatal for workers – especially those over 50. Hodel: “In addition to insufficient wage development, employees are again threatened with a devaluation of their pension assets, while the pension funds are doing well financially.”

Source:Blick