> Pension Funds Insider> Swiss debate tightening early access rules to shore up pension funds
Politicians in Switzerland have launched a consultation to consider tightening the country's liberal laws on savers' early access to their pension pots.
Members of Switzerland's mandatory corporate pension funds are currently allowed to take a minimum of 20,000 Swiss francs out of their pension pot to finance home purchases,. They can also witdraw from their retirment savings if they are leaving the country indefinitely or if they are financing a new business of their own..
The most common option, that of raiding retirement pots for home purchases, is now coming under scrutiny.
Some 2.6bn Swiss francs are taken out of occupational pension funds before retirement to fund home purchases by 35,000 savers each year. Critics argue that this in an unhelpful move at a time when the Swiss pension system is creaking under the weight of poor investment returns and a tradition of generous retirement benefits.
On the other hand, fans of the system point out that this flexibility can be extremely helpful in getting low earners onto the housing ladder in expensive Swiss towns and cities. Indeed, some would like to see the Swiss arrangements mirrored in other, more restricted pension markets like the UK, in order to revitalise saving.
A newly published government consultation paper on the future of occupational pensions made a call for more research and opinion on the matter.
It stated that due to conflicting evidence on what types of people are most attracted to early access to their pension pots "it is difficult to estimate the effects of early access in funding home purchases on financial security in old age" (see section 188.8.131.52.1 [German] here).
The report warned however that "relying on a pension pot to fund home ownership can lead to financial strain".
Colette Nova, vice president of the Swiss Federal Social Insurance Office (effectively a ministry) told newspaper Neue Zuercher Zeitung that the government is open to the possibility of tightening the rules on early access. Nova said that nothing was decided on yet and encouraged interested parties to respond to the consultation.
One possibility is that early access could be restricted or even outlawed from pension funds that are suffering deficits and do not want assets to be withdrawn by contributing members.
Conditions currently in place are that savers wanting to dip into their pension pots to fund purchases cannot use the money for second homes, have to wait for six months between early access withdrawals, and must show that their husband or wife agrees with their withdrawal.
12 January 2012
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