Couchepin unveils plan to “save” pensions

Couchepin was unfazed by the demonstrators at St Peter's island Keystone

Raising the retirement age to 67 and a hike in VAT are part of Interior Minister Pascal Couchepin's plans to "save" Switzerland's state pension scheme.

The Left and trade unions are up in arms.

Couchepin presented his controversial plans to the media on Monday during his annual walk on St Peter’s island in canton Bern.

According to the government’s figures, spending on the state pension scheme will increase significantly until 2040 as a result of demographic changes.

The interior minister maintains that it is necessary to “defuse the demographic bomb that is threatening our western societies,” he said.

To resolve part of the financial crisis, Couchepin plans to raise the retirement age to 67 – from 65 at present. The rise would take place in two stages – from 2015, it would increase to 66 and from 2025 to 67.

Life expectancy

Couchepin takes the view that a rise in the retirement age is justified given that the general health of retired population has improved and life expectancy has increased.

The proposals would also apply to both the state and occupational pension schemes.

“These plans are socially acceptable,” Couchepin said. “We need a credible welfare system and for that, we need to secure its financing in the long-term.”

Moreover, Couchepin wants pension payouts to be linked to inflation rather than based on final salaries as at present.

Couchepin’s proposals would keep costs lower, but even with them the state would need a large chunk of money to keep funding its pension commitments.

The interior minister wants to make up the balance by increasing VAT by 2.1 per cent until 2025 and 3.6 per cent until 2040.

This will be discussed as part of a revision of the federal pension scheme.

Union fury

Paul Rechtsteiner, the president of the Swiss Federation of Trade Unions, has slammed Couchepin’s plans as a “class struggle from above”.

The parliamentarian believes the revision – especially a rise in the retirement age – is a “fundamental threat” to the social welfare state in Switzerland.

If there is a prolonged financial crisis, Rechtsteiner maintains that an increase in VAT would solve the problem.

On Monday, some 100 people gathered near St Peter’s island to demonstrate against the interior minister’s plans. “Couchepin you will not kill us, we will fight your shock therapy with all means,” read one Construction Union banner.

Survey

A survey in Sunday’s papers suggests that public resistance to Couchepin’s plans might be intense.

In a poll of 600 people by the Isopublic Institute, some 79 per cent said they would refuse to work until the age of 67.

Another of Couchepin’s proposals – to link pension payouts to inflation and not to final salaries – was criticised by 58 per cent, with just 29 per cent saying they were in favour.

Viewed more positively was the idea of hiking insurance premiums to make up the shortfall in the pension scheme – 40 per cent of those polled were in favour of the measure while 46 per cent rejected it.

Finally, a majority of Swiss do not trust Couchepin to assure the long-term future of the welfare system. More than one Swiss in two said they were not confident in his capabilities to save their pensions.

Second blow

Couchepin’s proposals come as the government is planning further cuts in the minimum return guaranteed by company pensions.

Switzerland’s pension funds have been hammered by the downturn in the stock market, leaving them short of cash and unable to fully cover their commitments.

Last year, amid much controversy, the cabinet allowed them to cut the guaranteed return from four to 3.24 per cent. From January it wants a further cut to two per cent.

swissinfo with agencies

In brief

State spending on pensions is expected to rise dramatically until 2040 as a result of demographic changes.

The government believes that raising the retirement age by two years to 67 would make up one third of the funding shortfall.

The balance would be made up of an increase in VAT – by 2.1 per cent by 2025, and 3.6 per cent by 2040.