The Swiss Employers' Federation has re-opened the debate about the country's common occupational pension conversion rate, saying it must be lowered further.

In 2010 a nationwide referendum rejected a plan to cut the conversion rate – on which future pension promises are calculated – from 7% to 6.4%.

In a tersely worded statement, the employers' federation this Monday said lowering the rate to 6.4% remained necessary to solve a "serious crisis" in the pension system. The federation's vice president Wolfgang Martz said "demographic development and low investment returns make reform of the second pillar inevitable".

Swiss pension funds hit a plateau of 0.0% returns last year,according to the Association of Swiss Pension Funds (ASIP).

The federation took unions to task for their opposition to lowering the conversion rate. It said that "in insisting on an incorrect conversion rate, the Swiss Federation of Trade Unions are worsening the problem and blocking socially acceptable solutions".

The federation alleged that keeping benefit payments higher than investment returns justify results in a CHF 300-600 million (approx £200-400 million) transfer of wealth from workers to pensioners.

Martz added that he feels raising the retirement age is also necessary, and could allow for a smaller reduction in the conversion rate. "Painful and drastic" recovery plans would be needed if pension funds were not returned to a stable footing, he said.

The Swiss Federal Office for Social Insurance calculated that the average Swiss pension fund had a 2% funding deficit at the end of 2011. That caused concern in a country which has prided itself on its well run occupational pension funds.

Some pension funds in the country have very large deficits. A multi-billion shortfall at Zurich civil servant's fund BVK is causing political controversy.

First published 13.04.2012

dbillingham@wilmington.co.uk