The Pensions 2020 is a balanced package that guarantees our old-age provisions and pensions, says Barbara Gysi. For the leftwing Social Democratic Party parliamentarian, the Old-age and disability pension is also of great importance for the many pensioners living abroad and secures their well-earned retirement.
For 70 years, the old age pension has provided the social framework and most important pillar of our pensions system. It is contributions-based and therefore withstands any market turmoil. Thanks to higher wages and productivity, it is securely financed and the percentage of wages deducted as contributions has remained the same for 40 years. Now that the baby-boomer generation is approaching retirement age, it needs additional financing.
The occupational pension scheme - the so called second pillar of the social security system - is much more dependent on the financial markets and has been struggling for a long time with low interest rates. Combined with higher life-expectancy, this has made it necessary to lower the conversion rate in the mandatory part of the insurance. Pension funds which insure wage contributions above the mandatory CHF84,000 ($87,620) a year have long since lowered their conversion rates dramatically.
After many failed reform attempts, the government has decided to present a complete package. The aims of the reform were to maintain the level of pensions, secure the social framework and create flexibility in the retirement age. These aims have been achieved, with acceptable costs. This compromise was reached in tough negotiations which required all sides to make sacrifices, but at the same time allowed them to achieve their key goals.
With moderate additional financing, the old age pension has been secured until at least 2030. The federal government will continue to pay 19.55% of annual outlays. At the same time, value-added taxes of 0.3% – which were reserved until the end of 2017 for disability insurance – will go directly into the old age pension. From 2021, value-added tax will be increased by 0.3 percentage points to 8.3%. That is bearable – it will increase a purchase of CHF100 by just 30 cents. Women will also make a considerable contribution. The retirement age for women will be gradually raised to 65. At the same time, there will be more flexibility in the retirement age, allowing people to retire between 62 and 70, in stages if they so wish.
First increase in pensions for 20 years
The decrease in the conversion rate in the second pillar of the pensions system will lead to pension cuts of 10%. In order to keep pensions at the same level, wage deductions for the second pillar will be marginally increased and additional wage components will be subject to insurance. At the same time, old age pensions for the newly retired will be raised by CHF840 a year. Pensions for married couples will be increased by as much as CHF2,720 francs a year, because the married-couple pension will be newly calculated at 155% of the maximum single person’s pension. This improvement in old age pensions is financed by an increase of just 0.15 percentage points in wage contributions by workers and employees, and is secured until 2040.
Better insurance for women
Women are paying an additional price with the increase in the retirement age, but will in general benefit from this reform. The 500,000 women for whom the old age pension is the only source of income will experience a real improvement in their living standards in retirement, thanks to the increase in old age pensions. Retiring early means sustaining deep cuts in pension payments, so their bottom lines will look better. It’s also very important to note that part-time work will be better insured in the second pillar.
A solution fair to all generations
Contrary to the accusation of my opponent, the proposed reform is fair to all generations. Our pensions system offers financial security for later life, and the younger generation won’t need to support their parents financially. The increased cost is moderate. The additional wage deductions in the old age pension are minimal and the occupational pension wage contributions will also only be raised slightly. Young people should be happy about the change in the conversion rate, as at the moment, there is a yearly redistribution of CHF1.3 billion from young to old at the second pillar, even though this was never intended. And in the end – how would the young people be able to combine careers and family life if they didn’t have support from grandparents?
This is why Pensions 2020, a balanced package, deserves our support.
The views expressed in this article are solely those of the author, and do not necessarily reflect the views of swissinfo.ch.
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Translated from German by Catherine Hickley
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