Despite a decline in pension benefits over the years, there is a positive shift now as one in seven pension funds plans to improve benefits for pensioners. However, this improvement may come at the expense of insured individuals who will be more exposed to stock market risks in the future.
In response to low interest rates and increasing life expectancy, pension funds in Switzerland have been reducing conversion rates, resulting in a decline in pension benefits. However, some experts suggest that many pension funds have reached a sort of low point in terms of conversion rates. Despite the reductions in recent years, there has been no general decrease in benefits in occupational pension schemes. The stability in the replacement rate indicates that employers and employees have saved more in pension funds, even as the conversion rates have declined.
While some pension funds are looking to enhance benefits for pensioners, the majority are focusing on one-off payments to improve the situation. There is hesitancy among pension funds to offer long-term commitments or guarantees, as the volatility in the stock market necessitates flexibility in responding to financial market developments. As a result, insured individuals may increasingly depend on stock market performance for their pension benefits in the future.
According to a study by Swisscanto, the average conversion rate for Swiss pension funds is currently at 5.31 percent, down from 6.46 percent
