Pensions law: Rudolf Stram criticised the proposed changes

The amendment to the law on occupational pensions, which will be put to a vote on 22 September 2024, does not solve the problem of the huge costs of managing pension funds. This was stated by former price watcher and economist Rudolf Stram in an interview with Blick. In his view, more transparency is needed to reduce them. He estimates that these costs amount to CHF 8.6 billion a year, 80 per cent of which is eaten up by wealth management in the financial sector.

Stram is calling for a crackdown on high fees in pension funds

"Mandatory pension funds have become a self-service shop for banks and hedge funds," the politician criticises. The financial industry charges pension funds bank fees, deposit fees, brokerage commissions, transaction costs and stamp duty. On average, asset management costs account for 0.56 per cent of investments, but as Stram points out - "the spread of figures is very wide".

While large funds such as BVK and Publica for employees of the Canton of Zurich and the federal government have only 0.2-0.3 per cent, several smaller funds have 0.8 and 1.2 per cent, which is "too much," notes Stram. Pension investments cannot be compared to private equity, because "Institutional investors invest millions, this would reduce management costs," the official argues.

A total of 1,400 pension funds and occupational pension institutes (BVG) in Switzerland manage around CHF 1.2 trillion in pension assets. Therefore, even small improvements for the insured will be significant, the economist emphasises. However, the planned reform of the BVG will not solve the administrative problem. "For costs to come down, transparency is needed to create competition between funds and put pressure on fund boards and asset managers," he says.

Controversy over transparency of pension fund costs

According to the former price watchdog, there will be greater awareness of costs among the insured and pension funds and the financial industry will be forced to offer cheaper solutions. However, the Association of Swiss Pension Funds (ASIP) is opposed to greater transparency. In particular, the Federal Statistical Office (FSO) could present the total costs of each pension fund in its annual pension fund statistics as a single comparative figure, says the politician. This would not even require a new law, a directive or decree from the Federal Ministry of the Interior for the FSO would suffice.

While the MP believes that the BVG reform has positive elements, such as increased pensions for the poor and part-time workers, which will particularly benefit women, he does not believe it is necessary to reduce the conversion rate from 6.8 per cent to 6 per cent. "The reduction in the conversion rate was taken to stop the redistribution of funds from the young to the old. But after the change in interest rates, this is no longer happening," says the MP.

'When the Swiss National Bank (SNB) set negative interest rates, these punitive interest rates hit the large savings deposits of the elderly much harder than those of the young. But now the base interest rate is 1.25 per cent and senior citizens are once again funding their pensions on their own. The elderly are now even paying a little for the pensions of active savers.