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The vote on the occupational pension reform is behind us, and the public rejected it. The reasons for this rejection are varied. One issue repeatedly mentioned by the opponents of the reform during the debate was the reserves of pension funds. These reserves were labeled as too high, and the pension funds, in turn, were criticized as stingy.

The real hurdle concerning reserves and interest rates, however, went unmentioned: overregulation.

«Financial stability – redundant safeguards»

Pension funds have a clear legal mandate: they must ensure that their financial position remains stable at all times. This requirement applies to all institutions, whether they are competing in the market or not. However, for those funds that do compete, the legislator has imposed additional (and thus redundant) regulations.

Specifically, this affects around 200 collective and joint institutions. They are only allowed to offer so-called «benefit improvements» if they have achieved a target fluctuation reserve* of at least 75 percent. This regulation was introduced several years ago to strengthen the financial security of the funds.

«But what exactly is a benefit improvement?»

A few years ago, the Occupational Pension Supervisory Commission (OAK BV) took up this question – whether justifiably or not – and precisely defined the term «benefit improvement.» It refers to an interest rate that exceeds a certain threshold.

Initially, this threshold was defined moderately but was significantly tightened in 2023. Following strong criticism from the industry, this threshold was somewhat relaxed again in the fall of 2024, providing funds with more flexibility. The exact impact of this relaxation remains to be seen.

What is clear, however, is that Switzerland is a country of small and medium-sized enterprises (SMEs), and about 75 percent of those insured in occupational pensions are covered by collective and joint institutions. Three-quarters of the insured are thus affected by this regulation. At the same time, there are around 1,100 other pension funds that are not subject to these restrictions. These funds do not have to adhere to this strict rule, leading to unequal treatment within occupational pensions.

«Bureaucracy does not create security»

The current regulations aim to enforce additional security through bureaucracy. However, these regulations primarily result in additional costs and administrative burdens. The majority of those insured are disadvantaged, while a small number of pension funds remain unaffected by the restrictions.

The goal should be clear: occupational pensions must be stable and secure for all participants. This cannot be achieved by continuously creating more exceptions and favoring certain groups. Instead, what is needed is a thoughtful and fair reform that takes into account the reality of all pension funds, whether they are competing or not.

«Do we need a realignment?»

It is becoming increasingly clear that the debate over the level of pension fund reserves is obscuring a deeper question: Are these reserves really too high, or are the funds simply overregulated? The introduction of additional regulations may have been well-intentioned, but in practice, it leads to unequal treatment and additional costs.

Rather than continuing to adhere to detailed specifications and strict limits, the focus should be on flexibility and the actual needs of the pension funds. A realignment that does not diminish competitive advantages through bureaucracy could pave the way for a fairer and more efficient pension system.

*Fluctuation reserves are meant to cushion the fluctuations in invested funds during poor investment years.

Nico Fiore is the managing director of inter-pension, the pension fund association for collective and joint institutions. He is an expert in occupational pensions with a Swiss federal diploma and holds a Master of Advanced Studies degree in Pension Fund Management from the Lucerne University of Applied Sciences and Arts (FHZ).

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