picture showing Patricia Mattle during the interview
echo interview, October 2020

Babyboomers, too, need to help put the pension system on a secure financial footing


echo interview with Patricia Mattle

echo interview with Particia Mattle, CEO elipsLife Switzerland/Liechenstein

elipsLife echo: Frau Mattle, you joined elipsLife at the beginning of April 2020 in the midst of the COVID-19 emergency. How do you feel after six months as CEO for Switzerland and Liechenstein?
Patricia Mattle: It’s been a testing time as you can imagine, but overall I have a good feeling. To start a new job in the middle of a lockdown was tough but it worked out well. The open, positive communication culture at elipsLife helped enormously. A major challenge was getting in touch with clients. In normal times, I’d have spent the first three months visiting all clients and brokers personally. Corona made that impossible, so I had to fall back on telephone conversations. And on top of this, COVID meant we were also in the midst of an economic crisis: Many clients had no idea in April how this situation was going to pan out. Nobody knew how many people would lose their lives as a result and what else the future had in store for us. In such circumstances, it was really challenging to assess the price for mortality and disability risks for example.

What kind of concrete impact is the COVID-19 crisis having on elipsLife business in Switzerland?
Right now we’re not seeing any impact on our book of business because the situation has more or less returned to normal and we haven’t experienced any losses. That being said, we don’t know how the crisis is going to affect business for 2021. We’re assuming that wages and salaries across all industries will shrink by around 5%, which for us would mean correspondingly less premium income. Since the overall number of deaths doesn’t appear to be rising, the mortality issue is not a business problem for us. We do, however, assume that the invalidity cases as a result of the economic crisis will rise.

Apart from COVID, what are the biggest challenges in your market for elipsLife?
Over the last two years, we’ve seen a significant increase in the daily sickness allowance and accident areas. This has led to a massive increase in prices. Certain companies are already having trouble finding sickness allowance providers. This is because insurers, including elipsLife, are becoming more selective. In the occupational pension space, the prices for reinsurance coverage have been trending downwards for years now. I should mention here that elipsLife only offers reinsurance coverage for pension funds and collective foundations but doesn’t have its own collective foundation. The low prices benefit the foundations and the insured. Thanks to the low prices, foundations with stop-loss coverage, and also those without such coverage, can now afford to take out reinsurance. In the longer term, however, insurers need to consider whether this business will remain profitable. Digitalisation presents another challenge. The fact that elipsLife has taken a 10% shareholding in Sobrado Software AG, the leading provider of online services at the interface between insurers and brokers, means it’s well placed to meet the challenge of digitalisation.

picture showing Patricia Mattle during the interview

How do you assess the old-age provisioning landscape in Switzerland?
It’s in the midst of a consolidation phase. Many in-house company pension funds are closing down. Numerous funds are being absorbed into collective foundations. I’m also observing a strengthening trend towards professionalisation. It benefits everyone concerned when black sheep no longer operate in the market and pension fund assets funds no longer just disappear.

How does the trend towards collective foundations affect elipsLife?
For us, this development means fewer clients but, on the other hand, greater potential in the collective foundation space. Large collective foundations don’t need reinsurance but medium-sized and smaller ones do. And it’s here we can offer very good solutions.

The Federal Council has passed a bill to restructure the pension system, which is designed to place funding of the first pillar on a secure footing by 2030. In your opinion, where do you consider the priorities should lie in respect to this reform? 
The pension age has to be raised. Otherwise, we’re not going to get a grip on this situation. By proposing a 65/65 pension age, the Federal Council just isn’t going far enough. In my view this bill is anything but fit for the future. So for me, the Young Liberals of Switzerland initiative, ‘‘Pension Age of 66 for all,’’ is the smarter way to go, especially since it also links the future pension age to life expectancy. Unfortunately, this initiative doesn’t propose any mitigation measures – not everybody will be able to continue working until they’re 70.

The Federal Council wants to raise Value Added Tax by 0.7%. In your view, where’s the pain threshold here?
We need to see the topic of Value Added Tax in context. Compared to other countries, this tax in Switzerland is very low. So I don’t see a big problem in raising VAT to help finance our pension system. Unfortunately, we seem unable to manage exempting certain products from VAT. Countries such as France are doing a better job in this respect. In that country, everyday products such as basic foodstuffs and certain hygiene products for women are either taxed at a lower rate or exempt from VAT altogether. To impose a tax of 8 or even 9 % on luxury goods in order to finance the pension system really doesn’t bother me that much.

picture showing Patricia Mattle during the interview

The second pillar also needs reform. Supported by the Employers’ Federation and unions, the Federal Council has tabled a reform proposal that entails lowering the conversion rate from 6.8 to 6%. The resulting shortfall in pension payouts would be compensated for by a pension supplement financed by a contribution from wages and salaries. Would this be the right way to go?
It’s perhaps not the optimal solution but we should be glad that, at long last, we have a compromise proposal on the table. Regarding the conversion rate, absolutely nothing at all has happened since 2010. Even though it’s not perfect, this proposal has now brought us one step further. If this means we can reduce the conversion rate, then I’m happy.

The centre-right parties have rejected the redistribution proposal in the second pillar, saying that such a change would be alien to the system…
…then they should come up with a more sensible proposal. I don’t think a redistribution in the second pillar is a good idea either, but at the moment I don’t see any other way to bring down the overly high conversion rate.

Should retirees also help put the pension system on a secure financial footing or are already acquired pension rights a no-go area?
Not at all. Retirees also need to do their part in the financial overhaul of the pension system. No question about it. The young can’t just go on financing the babyboomer generation. Over the last 30 years, the babyboomers were the key political and economic decision-makers. And I think they made sure they lined their own nests. That’s not going to work anymore. They should have restructured the old-age provisioning system at a much earlier stage. They missed that opportunity so now they need to help shoulder the resulting financial burden.

In its autumn session, parliament did not debate the reform of the pension system, despite surveys showing that this topic is of great concern to young Swiss citizens especially. What concrete action do you think the politicians should take in this regard?
They should propose a reform of the pension system that’s workable and one that resonates with the people. Then there’s the re-engineering of the second pillar that’s being dealt with as a separate issue. Politically, I can understand that the Federal Council wants to tackle one thing at a time. That being said, the reality is that you can’t separate one pillar from the other. The goal of the whole reform has to be to preserve the strengths of the three pillars as they are. Weakening the second pillar in favour of the first would be an ill-advised move. Saving for old age on your own account is an accomplishment we should absolutely protect and maintain. No other country in Europe can equal this achievement and in my view it’s tremendously important.

So we can assume that you support the strengthening of the third pillar?
Absolutely. The tax-deductible elements need to be increased. At the same time, however, we still have to focus on the second pillar. Of the essence here will be a flexible solution geared to modern life styles. Currently, the pension funds aren’t able to take account of part-time working, sabbaticals, career breaks, parental leave periods and other changes in career paths. Our industry needs to develop visions as to how it intends to address new life styles and work models.

picture showing Patricia Mattle during the interview
Personal Profile
Patricia Mattle
CEO elipsLife Switzerland/Liechtenstein

Patricia Mattle has been with elipsLife since April 2020 as CEO for Switzerland and Liechtenstein, with responsibility for Central Europe. She has a Masters Degree in Marketing, Services and Communication Management from the University of St Gallen (HSG) and has a lecturing diploma in commercial studies also from the HSG. Patricia Mattle grew up in St. Galler Rheintal and worked for 10 years in the insurance industry in Switzerland, France and the U.S. Before joining elipsLife, she spent two years as Head of Pension Fund Management der AXA Switzerland. Mattle is keen on jogging, politically engaged and from 2008 to the beginning of 2015 was a member of the Directorate of the Christian Democratic People’s Party of Switzerland (CVP). She is married, mother of a one year-old child and lives in Zurich.

echo interview with Patricia Mattle