Federal Council sets the BVG minimum interest rate far too high

The BVG minimum interest rate determines the rate at which retirement assets in the mandatory BVG scheme must be credited with at least that level of interest. With its decision, the Federal Council is raising the minimum interest rate for 2027 from the current 1.25 to 2.0 percent. That is enormous. Never before in the history of the BVG has the minimum interest rate been increased so sharply.

Even after the BVG Commission’s recommendation of 1.75 percent, the SIA had pointed out that good investment results in the overall market cannot be transferred one-to-one to the statutory minimum interest rate. While investment results are only known in hindsight, the BVG minimum interest rate is set in advance and must be met regardless of developments in the financial markets in the coming year. The BVG minimum interest rate is not a retroactive distribution of profits.

Long-term sustainability remains crucial

Pension institutions differ considerably in terms of their obligations, their investment options, and their risk-bearing capacity. BVG-affiliated pension institutions in particular, and collective life insurers offering full insurance, assume comprehensive guarantee commitments that they must fulfil regardless of how financial markets develop. Accordingly, they align their investments toward security over the long term. At the same time, not all investment income is available for crediting interest to retirement assets: pension institutions must also build fluctuation reserves, set aside provisions, and meet their pension obligations. A minimum interest rate set too high ties up additional funds and thereby reduces the leeway to safeguard long-term financial stability. 

“The BVG Commission had already recommended a politically motivated, critical increase. From a long-term perspective, the Federal Council’s decision significantly weakens occupational pension provision,” says SIA CEO Urs Arbter.

A cautiously set minimum guarantee does not rule out higher interest. If the financial position of a pension institution allows it, its highest governing body, composed on an equal-representation basis, can decide on an interest rate above the statutory minimum.