Pension fund money must yield more: BVG minimum interest rate rises to 1.25 percent!

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Now it is certain: the minimum interest on pension savings at pension funds will increase from 1 to 1.25 percent next year. The money from the occupational pension scheme (BVG) should yield slightly more for the insured in the future. The Federal Council decided this on Wednesday.

The state government follows the recommendation of the Federal BVG Commission under President Christine Egerszegi (75). In the committee, employers, insurers and trade unions discuss how much interest must be paid in the future on our balances in the second pillar. And this time opinions varied widely: the committee members’ suggestions ranged from 0.5 to 2 percent. Various variants were voted on.

“In the final vote, a clear majority voted for 1.25 percent,” the committee noted. And explained that this mainly took into account the significant increase in interest rates due to increased inflation. The Federal Council has now also come to the conclusion that a slight increase in the minimum interest rate is justified.

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

The unions wanted 2 percent

So 1.25 percent is not enough for the unions. They were anything but satisfied with the Commission’s proposal and called on the Federal Council to increase the minimum rate to 2 percent by 2024. In vain.

“At a low 1.25 percent, the minimum interest rate is well below current inflation,” says Gabriela Medici (38) of the trade union federation. “The pension capital of policyholders continues to lose value and the change in interest rates does not reach workers.” The insured would have already paid a high price during the negative interest phase. “The end result will be even lower pensions,” Medici complains.

Since 2017, the minimum interest rate for the mandatory balance in the second pillar has been 1 percent. In 2002 this was still 4 percent. Over the past ten years, the average interest on total balances was 2.34 percent. If you take inflation into account, it becomes clear: over the past three years, the assets have lost their real value.

In addition: “The financial situation of the pension funds is good due to the increased interest rates and the returns are also positive,” says Medici. For years, the minimum interest rate has lagged far behind the actually generated returns. “After fifteen years of declining pension funds due to low interest rates and excessive costs, this should now come to an end.”

Source:Blick