echo-interview with Marc Gerosa, Managing Director, Schweizerischer Kaderverband (SKV), St Gallen

elipsLife echo: Mr Gerosa, the Schweizerischer Kaderverband (SKV) was established in 1988 to promote the economic and professional interests of its members. What does this mean exactly?

Marc Gerosa: With the legal form of a registered association, the activities of the SKV centre on occupational pension schemes. The body is an affiliation of corporate executives, self-employed persons and SME’s that seek out attractive, demand-driven pension schemes and subsequently offer these to its members at preferential rates.

What advantages does the SKV offer ist members?

For SME’s and self-employed people, it’s relatively difficult to find attractive pension schemes. So our association designs suitable products for just these target groups, for example in the area of occupational pension plans. The SKV is officially recognised as a professional body by the supervisory authorities in eastern Switzerland. So it’s also able to offer solutions to self-employed persons across all industries, regardless of whether these persons are insured under the Swiss Occupational Pensions Act or not. This possibility doesn’t exist anywhere else in Switzerland. Usually, self-employed persons need to apply to their respective professional association and, should such a body not exist for their particular profession, to the BVG National Benefits Foundation. The conditions this body is able to offer are less attractive however.

Does the SKV only operate within the scope of the Federal Law on Occupational Benefits ( BVG)?

No, we also offer attractive products in the third pillar, for example the so-called pillar 3b, in the form of  straight risk coverage. Additionally, we provide insurance solutions that go beyond pure provisioning. For instance, just recently we launched liability insurance products covering professional, business and D&O liability. These areas fit very well with SKV’s overall capability. We’re also active in medical and sick-pay insurance, where demand is especially strong from the self-employed and small entrepreneurs. It’s in these very areas that attractive products for SME’s are difficult to find.This is where we can help.That being said, old-age provisioning remains the main focus for us, particularly occupational pension plans. For SKV, this has become a very important area of activity.

You achieve beneficial insurance solutions for your members through group contracts. What criteria do you apply when choosing your insurance partners?

As a general rule, we select one insurance partner per product. It has to be an established, economically sound company that our members can trust. The product needs to be simple, flexibly structured and geared towards the interests of our members. All this means that we seek insurance partners who are prepared to work with us to devise mutually beneficial solutions.

What do you know about how interested your 17,000 members are in social security provisioning? Is it growing or subsiding?

Given the recent media exposure, there has been a slight upturn in interest, although I can’t say there’s been any real fundamental change. Many SKV members are either in middle age or heading towards retirement. So with these people, old-age provisioning is front of mind. On the other hand, the younger age group and those in lower income brackets pay little or no attention to this topic. This is unfortunate since old-age provisioning affects everyone. The situation is quite different when it comes to the self-employed. They have to take care of this matter right from the start. We’re always hearing from our members that they’ve neglected doing anything for too long. Right now, the hot topics among our members are pension security, pension versus lump sum payment, the development of the conversion rate, the funding ratio and investment policy problems.

Even though old-age provisioning is the number one concern in many circles, the last 20 years haven’t seen any reform of the system. The Federal Council and Parliament now want to prioritise the restructuring of the first pillar (AHV), which could lead to using company tax reform to push the reform of the AHV. Is this a good idea?

I would reject this idea. I regard this as political trickery, I would even call it horse-trading. The two topics have nothing in common and in my view shouldn’t be conflated. On the contrary, they need to be treated quite separately from one another.

Which measure would you support: raising wage and salary contributions or increaing value-added tax?

We have to do everything to protect Switzerland’s 3-pillar system, regardless of the measures necessary to achieve this goal. Personally, I would favour raising value-added tax. However, any increase should be kept to a minimum.

The new proposal no longer includes raising the retirement age for women. What’s your view on a retirement age of 65 for women?

Because they have a longer life expectancy than men and because people in general are living longer, raising the pension age for women is an urgent necessity. And in the long term, demographic development means we need to consider a retirement age of 66 or 67 for everyone anyway. That being said, I think the trend will be towards a flexible retirement age, enabling people to choose between 60 and 70. Sooner or later, we might also see the introduction of pension ages dependent on the particular industries concerned. We definitely need a certain degree of flexibility so that we can better take account of individuals’ different needs and preferences.

On the subject of pension funds: Isn’t there a danger that the current low interest rates coupled with demographic development could unhinge the second pillar and mean that we fall victim to benefits promises that just can’t be financed?

The danger is there, absolutely. However, provided the market environment remains healthy, I don’t see any major problems for the second pillar. But this could change, should we experience a less favourable economic climate. The pension funds will then have to take prompt counter measures. In my view, the way to prepare for rough economic waters, is move away from comprehensive towards semi-autonomous insurance coverage. This way, the pension funds will gain more freedom of action and be able to achieve more attractive interest rates on retirement savings. And contributions can be lower as well. These advantages will benefit each individual policy-holder. The move towards a semi-autonomous solution should work, provided a pension fund operates efficiently, is soundly funded and has the pensioner-gainfully employed ratio under control.

Should pensioners also be asked to contribute towards the financial restructuring of the second pillar, or are already secured pension entitlements a taboo topic?

As a matter of principle, already acquired pension rights should be secure. However, if the system were at risk of collapsing, these rights, too, would be threatened. I should mention in this connection that the current conversion rate of 6.8% is too high in my view. To ensure the pension funds remain on a solid financial footing in the long term, the conversion rate needs to be adjusted downwards. The negative impact of lowering the conversion rate could be mitigated by an adjustment of the coordination amount.

If you could give some advice to the pension funds in Switzerland, what would it be?

It’s important that transparency be maintained towards members of statutory insurance schemes and companies. The BVG’s complexity is enormous. If you’re not dealing with this topic on a daily basis, you’re going to find it almost impossible to understand the material. The workings of the BVG have to be explained to all sections of the population in a clear and understandable fashion. Although the topic should concern all of us, a shockingly large number of citizens don’t know how the system functions. They don’t engage with the system because the sheer complexity of the AHV, the BVG and the third pillar acts as a deterrent. In addition, the BVG is over-regulated. In the spirit of reducing complexity and creating transparency, the pension funds should increase pressure on the regulator and work towards simplifying the whole system.