The Social Commission of the National Council in Switzerland has announced plans to reduce the threshold for paying into BVG pensions, to enable more people to benefit from the scheme.

BVG pension in Switzerland does not cover people with multiple jobs

Under the current system, any person over the age of 25 in Switzerland whose salary is more than 21.510 Swiss francs a year must pay into a BVG pension, one of the three pillars in the Swiss pension system. BVG is paid jointly by the employee and the employer, with contributions increasing as a person gets older.

However, as the new plans make clear, the system does not take into account the 8 percent of people working in Switzerland who have multiple jobs. They say that, since someone has to be earning more than 21.000 Swiss francs working a single job to be eligible for the pension, many people working multiple jobs do not benefit, despite earning more than the threshold in total. 

The Federal Statistical Office estimates around 370.000 workers may fall into this category, and despite the possibility of voluntarily contributing to the pension, only 242 workers took up the offer last year. Industry experts noted that this may be because they do not want the additional wage deductions from paying into the scheme, or felt that their employer may disapprove if they are forced to pay.

To combat this issue, the National Council has put forward plans to lower the wage threshold, beyond which employers and employees must pay for BVG, to 12.548 Swiss francs a year. They also suggested that the minimum age for paying into the scheme should be lowered to 20 years old. The Federal Council hopes these plans will mean that people will have more savings when they reach retirement.

New plan for Swiss pensions mean lower incomes pay more

The new plans have faced criticism, with the Neue Zürcher Zeitung reporting that they will cost wage earners and companies 2,1 billion Swiss francs a year to implement. They said that the changes will mean that low-wage earners will have to pay more to the pension scheme, with workers earning 20.000 Swiss francs a year having to pay 4,5 to 7 percent of their annual wages a year to just BVG, whereas before they paid nothing.

This new initiative has come alongside an announcement that interest rates on retirement assets will remain at 1 percent for 2022. This is in spite of recent warnings that inflation may overtake interest rates on pensions, leading to a loss in funds. The National Council hopes to make a decision on the reforms by December 2021.