picture showing Ruth Humbel and Hans Köchli in a discussion
echo interview, February 2021

The conversion rate is a political pledge


echo interview with Hans Stöckli and Ruth Humbel

echo interview with Member of the Council of States Hans Stöckli, Social Democratic Party Bern, and National Councillor Ruth Humbel, Die Mitte Party, Aargau

elipsLife echo: Old-age provisioning has long been at the top of the public's so-called worry barometer, currently only overtaken by COVID-19. The Council of States has nevertheless shelved any debate around reforming the AHV pension system. Mr. Stöckli, aren’t you taking voters’ concerns seriously?

Hans Stöckli:
It’s precisely because we take these concerns very seriously, that we’re looking for a solution that would attract a majority. Another failure of a bill concerning a reform of the AHV or the BVG Pension Fund Law would make the situation even worse. Opponents of the AV2020 pension reform bill in 2017 claimed that a revised AHV reform bill would pass easily. But it quickly became apparent that the devil was in the detail.

Ruth Humbel:
Hans Stöckli and I fought for the AV2020 bill in 2017. At that time, the reference retirement age of 65 for both sexes and the compensatory measures - especially for women with lower incomes - played a significant role. If all members of the Council of States had bothered to delve into the "old" files, no new reports and calculations would’ve been necessary. Updating the AV2020 documents and supplementing them with the new elements of the supplementary financing via the tax reform and AHV financing (STAF)* would’ve sufficed to get the new AHV bill off the ground. 

But I still regret we didn’t get the bill through back then. In many respects today, we’re almost back where we were. That said, new approaches have since then also emerged, especially on the compensation front. But for our part, we’ll never agree to increasing the retirement age for women without granting substantial compensatory measures.  


For years, there’s been a political blockade on retirement provisioning. Mr. Stöckli, is the Left pursuing a policy of denial?

With the exception of the AV2020 proposal, the Left has always had the people behind it on provisioning issues. Moreover, different reasons have been put forward for the failure of the AV2020 initiative. Some see the surcharge of 70 francs as the deciding factor and others the proposal to raise women's retirement age. We’d therefore be well advised to revisit these issues and try to seek solid majorities. 

The big problem with the AV2020 proposal was the fundamental opposition from the SVP and FDP as well as the referendum from the hard Left.

Yes, that's right. To put it diplomatically, the Jusos weren’t much help to us with their referendum. In the STAF referendum however, we managed to gain a majority. That said, when it comes to raising the retirement age for women, there’s a hard core on the Left today that won’t go along with this under any circumstances. 

picture showing Hans Stöckli

Apropos retirement age: The Federal Council wants to raise the retirement age for women to 65. Do you think that's a good idea, Ms. Humbel?

Humbel: Absolutely. Given demographic developments, higher life expectancy and improved health standards, upping the retirement age to 65 is the right thing to do. At the same time, however, I believe improvements need to be made in the 2nd Pillar for women in lower income groups. For the purposes of the BVG in the 2020 pension initiative, I was already pushing for the aggregation of several part-time jobs. I should add that, in my view, the question of equal income for equal work must be solved independently of the retirement age question.

Do you agree, Mr. Stöckli?

Stöckli: I’m glad Mrs. Humbel agrees with me on the need for adjustments to the 2nd pillar. We do indeed have an unexplained wage gap between men and women. Increasing the pension age for women is practically the only proposed AHV savings measure in discussion right now. But it won’t work without fair compensation. This complex background explains why the Commission still needs more time to work out new models.


How high does the retirement age have to be to ensure the AHV and pension funds stay on a solid financial footing in the long term?

Humbel: This question can’t be answered in isolation. The state of the economy is crucial, as is the current pandemic. Now’s not the right time to debate questions about raising the retirement age. I’m in favor of an increase, but first of all people have to be confident enough to work longer. There’s no point in setting successive retirement age increases if folks over 50 are simultaneously losing their jobs with no chance of ever finding a new employment.

I absolutely agree with Mrs. Humbel. But we shouldn’t forget either that one third of all working people still retire early, that is before the regular retirement age and AHV eligibility. On the other hand, retirement and AHV pensions are rarely postponed. 


What’s your position on the "Retirement age 66 for all" idea put forward by the Young Liberals - a proposal linking the future retirement age to life expectancy? 

Stöckli: It doesn’t have my support. It doesn't align with our culture, because it conflates things that don’t belong together. What average age should be taken as a baseline? Are we talking about theologians or professors, who statistically are supposed to live the longest? Or are we referring to innkeepers or construction workers, who are said to have significantly shorter life expectancies? 

 We have to differentiate. Someone who starts working at age 20 and works 44 years until 64 or 65 is in a different situation to someone who studies until 30 and only then starts paying into the 2nd Pillar. It has to be possible to take into account the length of time you’ve been paying into the system. Pension entitlement could also be linked to contribution years in the 2nd Pillar, especially for low incomes. In addition, we should also try to find specific industry solutions. The construction sector has already taken the lead here.


picture showing Ruth Humbel

The Federal Council wants to restructure the 2nd pillar with a lower conversion rate and compensate for pension shortfalls through contributions from wages and salaries. Many reject this redistribution in the 2nd pillar as being alien to the system. So does the Federal Council's BVG proposal have a chance of being passed in parliament? 

Humbel: Not in its present form. This proposal is based on an idea put forward by the social partners. But in parliament, it doesn’t enjoy any support from the employers' side. In fact, there’s hardly any industry that backs the proposal. In my view, too, making the 200 franc redistribution apply to everyone, including the well-off, who are not affected by the reform, is quite wrong. This would introduce a pay-as-you-go element into the 2nd pillar for eternity. On the contrary, what we should be doing is finally putting a stop to the already existing redistribution in the 2nd Pillar - that from the working generation to the pensioners - not increasing it. 

Stöckli: I’m not overly bothered by this issue. What’s needed is a solution that’s acceptable to the majority, one that’s is appropriate and fair. It seems to me that mixing the principles underlying the 1st and 2nd pillars with the solidarity idea of compensation benefits is not wildly out of line. The proposal from the employer and employee sides is a compromise - and no other compromise solution has emerged in the consultation process. A model that aims for a conversion rate of 5.8%, for example, has no chance. The people would never accept such a reduction. 

Humbel: I’d agree. For political reasons, the conversion rate can’t fall below 6%, even if this would be appropriate from a technical point of view. 

Stöckli: We have to show the people what impact a solution will have on their personal circumstances. If we’re asking them to pay more but get less back, I can understand that they’d be less than enthusiastic about accepting such a solution. Consequently, I believe the solution proposed by the social partners is courageous, creative and certainly not as exotic as portrayed. Until a better proposal is on the table, I see no reason why we shouldn't move forward with this compromise. 

picture showing Hans Stöckli

Solidarity is a good keyword: Given the Corona crisis, should pensioners be expected to help restructure the 2nd pillar, or are already acquired pension entitlements off-limits?

Humbel: Pensions are acquired rights; it's a matter of good faith. If we start cutting pension entitlements, we’re violating these principles. I’d like to convince pensioners to vote with the young for a bill that’s geared to the long term. Today, according to the pension forum, CHF 7.2 billion are redistributed annually. Pensioners receive money they haven’t paid in themselves, but instead comes from the younger generation in employment. Pensioners have to be made aware of this fact and convinced that we need a solution that won’t put their grandchildren at a disadvantage either. 

Stöckli: It’s prudent and correct to limit the pensioners' restructuring contribution to the increase in value-added tax. So they’d be making their necessary contribution within the framework of this tax. You can’t tamper with vested rights. 


The Corona crisis will certainly have an impact on retirement provisioning. Can you already foresee any consequences?

Not yet in concrete terms, but the pandemic is likely to have a significant, sustained impact. Tax revenues from social security contributions for example will shrink and we’ll see higher social benefit payouts. In a tight situation such as this, we’ll have to be particularly careful when it comes to pensions. 

Because we don't know how the situation will develop, we’d do well to fashion an equitable reform of our BVG pension fund law that will continue to provide people with a compensatory income. The pandemic shows we need a strong state with sensible policy solutions to serious problems. We’ll have more welfare recipients and unemployed people, but there’ll be a time lag before this affects our pension system. What we can see already is how the pandemic has greatly accelerated the digitalisation of the world of work. This is also going to affect the pension calculation bases in the medium term.


In numerous echo conversations, interviewees from the business world urged the politicians to finally take action to remedy the challenges we’re facing. What do you expect from the pension funds in return?

Stöckli: They should start to increasingly look beyond their own backyard and help introduce solidarity principles into the second pillar as well. They should also realise that what they expect of politicians, namely the reduction of the conversion rate, can’t be had for free. The conversion rate is a political pledge, just like the retirement age of 64 for women. Such a pledge is not going to be honoured without the promise of something in return. 

We agree on that. The pension funds need to grasp the socio-political significance of the situation and be prepared to support sensible solutions. This wasn’t the case in the 2017 referendum campaign. In addition, I would call for the mandatory part of the 2nd pillar to be drawn as a pension in the event of retirement and not as a lump sum. Today, many pension funds talk their customers into taking a lump sum at retirement age, thus shirking their responsibility towards society as a whole.  

*STAF - Federal Law on Tax Reform and AHV Financing, which was approved by the electorate in May 2019 and came into force on January 1, 2020.


picture showing Ruth Humbel
Personal Profile
Hans Stöckli
Member of the Council of States, Social Democratic Party Bern

A member of the SP and a lawyer, Hans Stöckli has represented the canton of Bern in the Council of States since 2011, of which he was president in 2020. He is a member of the Commission for Social Security. He was mayor of Biel from 1990 to 2010. A resident of Biel, Stöckli was born in 1957, is married and father of three adult children.
Personal Profile
Ruth Humbel
National Councillor, Die Mitte Party, Aargau

A Die Mitte member, Ruth Humbel has been on the National Council for the canton of Aargau since 2003. She currently chairs the Commission for Social Security and Health. A lawyer, Ruth Humbel lives in Birmenstorf and was a member of the Grand Council of the Canton of Aargau for the CVP from 1981 to 2003. Humbel, born in 1957, is married and the mother of two adult children.

echo interview with Hans Stöckli and Ruth Humbel