Stefan Meierhans talking
echo interview, November 2022

Could flexible retirement age be the way forward?


echo interview with Stefan Meierhans

echo interview with Stefan Meierhans, Switzerland’s Federal Price Watchdog

elipsLife echo: Electricity, gas, petrol, health insurance, food, leisure – everything’s getting more expensive. People in Switzerland are dealing with sky-rocketing price increases. Is the public sector doing enough to counter the cost explosion?
Stefan Meierhans:
Let's take the energy sector as an example: This summer I recommended that the Federal Council help people with their electricity bills. I’m mainly concerned with grid usage, which accounts for about one third of the electricity bill. While scarcity on the energy front restricts the room for manoeuvre, the situation is different for actual grid usage – which, I should add, is a monopoly area with regulated costs. I have been saying for years that we’re gold-plating the grids. When setting the grid usage price, an equity interest rate of 6.96% applies. This is absurdly high. At 1.75%, the interest on borrowed capital is also too high. This additional expense adds up to around CHF 350 million per year. I had already recommended to the Federal Council in 2017 that this interest rate be lowered. We’re still waiting in vain.

In addition to the energy component and grid usage, fees and charges are also due on the electricity bill. What’s the situation here?
The same applies. The grid surcharge alone, set by the federal government to promote alternative energy, amounts to 2.4 cents per kWh. On top of this, many cantons and municipalities also charge electricity concession fees and similar extras. Instead of being abolished or at least suspended, these are rising on average from between 0.9 and 1.0 Rp per kWh. This is another of my proposals that has fallen on deaf ears up to now. 

Why doesn’t the Federal Council react? 

The electricity companies are mostly owned by the cantons and the cities. In the form of compensation for grid use and as fees and charges, the electricity supply has been a cash cow for the public budget for many years now. Once you’ve become accustomed to such revenues, it’s difficult to do without them. That said, I’m still very annoyed that the federal government doesn’t do its homework, especially when it comes to grid use.

Does your recommendation on grid usage stand a chance of success?
In the autumn session, the Council of States voted 20 to 19 in favour of an adjustment of the interest on capital costs and that a corresponding request be sent to the Federal Council. This is a gratifying and noteworthy step forward, not least because it feels like every second member of the Council of States sits on the board of directors of an electricity supplier! There have also been two corresponding motions in the National Council. The current energy situation at last seems to be setting things in motion in politics. My job is never a short-distance run, but always a marathon. 

Stefan Meierhans talking

At the beginning of September, you called on the banks to reduce what you see as the exorbitant fees they charge their customers. Are pension funds also on your radar?
The Price Watchdog always steps in when there are "trapped customers", that is to say people who don’t have the freedom of choice, or when the price isn’t the result of fair competition. The pension funds have been an issue for a long time now. I keep receiving citizens’ complaints about excessive administrative costs, but so far I simply haven't had the resources to look into the issue in depth. I don’t rule this out for the future however. 

What does your overall track record look like in financial terms?
As the Price Watchdog, I not only make recommendations, but also take decisions. For example, some time ago I initiated proceedings against concerning commission that the hotels have to pay for the service this platform provides. At Swisscom, I negotiated a price reduction for the use of fibre-optic cables, and with the Swiss Federal Railways I pushed through the idea of the Supersaver Tickets. On average over many years, the Price Watchdog achieves savings of several hundred million francs per annum. 

What happens if your recommendations aren’t followed?
If a particular government authority doesn’t follow our recommendation or deviates from it, it has to explain publicly why. This creates a certain pressure. For example, the city of Zurich wanted to more than double the price of parking cards. We came out against it and the city withdrew its plan. In this way, many larger and smaller concerns end up on my table, and the sum total is the several hundred million francs saved per year for the citizens. 

How many staff does your office employ?
I have a total of 17 FTE employees. Of these, 60% are economists, 20% lawyers and 20% mainly in the secretariat and market monitoring. The health affairs department is the largest with 4 FTE.

Even without the pandemic, the health sector is one of the focal points in terms of the cost explosion. Where do you see possible cost brakes in this area?
In 2017, I was a member of the expert commission that made 38 concrete proposals on what should be changed in the healthcare system. Here’s one example: Pharmacists receive a percentage payment for medicines they sell. Today, this is 12% of the factory selling price. If a patent expires, cheaper generics could come into play. If the pharmacist sells the original for 100 francs, he receives 12 francs; if he sells the generic for 50 francs, he is left with 6 francs. This is a negative incentive in the system: The payment should not be a percentage of the sales price, because the more expensive the product, the higher the payment. The Federal Council could change this mechanism. In 2015, following our recommendation, it promised to implement this change by 2018 at the latest. We’re now four years down the road and the Federal Council still hasn’t done anything. This is annoying!

It’s not only those paying health insurance premiums, but also the KTG insurers and pension funds that are confronted with constantly rising health costs. Burnouts are a major factor here. Are the follow-up costs of psychological overload at the workplace getting out of hand? 
Burnouts are a fact of life. In the case of compulsory health insurance, there are voices calling for a reduction in the catalogue of benefits. But if you want to sell KTG insurance and exclude burnouts, who’s going to purchase the product? In addition to price competition, there’s also competition around benefits. So, my hope is that we’ll see more initiatives to combat burnouts going forward. This is an economic task the Federal Council has to take care of.

Stefan Meierhans talking with his hands

With a narrow majority voting in favour of AHV 21, the electorate has ended the blockade over old-age provisioning. Now voices on the left are calling for measures to promote women in the 2nd pillar. Where do you set the priorities for the upcoming pension reform?
This is a question for politicians to decide. As the Price Watchdog, I’m a judicial authority, not a politician. So, from my point of view, the cost question has to be paramount. For politicians, on the other hand, the sticking point is the compulsory part of old-age provisioning: Part-time workers or people with career breaks who are only covered by this mandatory part are those potentially hit hardest by the adjustments to the BVG. In the non-compulsory sector, the pension funds ensure that the mixed calculation works. Consequently, solutions have to be found for those who only have mandatory coverage. I’m not saying this as the Price Watchdog, but as a citizen. Because for me, from the perspective of society as a whole, this is also a question of exercising solidarity. 

Isn’t the advancement of women important for you in the context of the pension reform?
Men also work part-time, have to cope with interruptions in their working lives and don’t get beyond the BVG compulsory pension scheme either. I think it’s wrong to boil down fundamental issues like these just to the gender question. The fact that statistically more women work part-time isn’t pertinent to finding a solution. What is relevant is the problem itself, regardless of whether we’re talking about men or women. 

What’s needed to put BVG pensions on secure footing?
The pension funds must reduce their administrative costs and get a tighter handle on costs. What’s more, the focus has to be on those people who only draw benefits under the mandatory scheme.

How high must the retirement age be so that the AHV and pension funds have a solid foundation in the long term? 
A defined retirement age is necessary as a reference point to make the calculations. Nevertheless, a fixed retirement age is outdated. Construction workers need a different retirement age than office workers. For pilots or instructors in the army, different retirement ages already apply today. That is the right approach. We need more flexibility and not discussions about a fixed retirement age. At the beginning of life, we already have this individualisation: Some go to school for 12 years and benefit from 12 years of state-funded education, while others go to school for 20 years or study and benefit from the state for 20 years. If we can do that at the beginning of life, why shouldn't individualised solutions be possible at the end of life? 

Stefan Meierhans laughing
Personal Profile
Stefan Meierhans
Switzerland’s Federal Price Watchdog

Stefan Meierhans was born in Altstätten in the Rhine Valley of St. Gallen in 1968. He studied law at the universities of Basel, Oslo and Uppsala and graduated with a doctorate from the University of Basel in 1998. Meierhans was subsequently appointed to a position in the Federal Department of Justice. From 1998 to 2003, he worked in the General Secretariat of the Federal Police and Justice Department as a staff member for Federal Councillors Arnold Koller and Ruth Metzler-Arnold. Meierhans subsequently moved to the private sector. He has been the Federal Price Watchdog since October 1st, 2008. He is a member of the Die Mitte party. He is married and lives with his family in Bern.

echo interview with Stefan Meierhans