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A retirement age of 65 for women is self-evident, Christina Egerszegi
echo-interview, June 2014

A retirement age of 65 for women is self-evident

ELIPSLIFE ECHO - INTERVIEWS WITH PROMINENT BUSINESS LEADERS

A retirement age of 65 for women is self-evident

echo-Interview with Christine Egerszegi, State Councillor for the canton of Aargau

elipsLife echo: Ms Egerszegi, referendum results in the past few years show that a gap has opened up between the political class and the people. How could this and the resulting scepticism and mistrust happen?

Christine Egerszegi: For me, the big gap is not between the people and Parliament, but within the nation as a whole, in particular between the urban and rural communities. Their problems and needs are different, and this becomes clear whenever a referendum is held. The people in the cities are more open-minded with a more globalised outlook than those who live in the more rural areas. In the Council of States we are quite close to the people, primarily because party politics do not play such a big role. In the National Council, however, it has become the fashion not to tolerate any divergence from the party line. But when in a multi-party state all parties only look out for themselves, it is difficult to find good solutions.

… and what can the political circles do about this?

Disseminate information to the public as well as possible. We also have to exercise our function as a lay parliament. When I stand in a queue on Saturday when I do my shopping for the weekend, I can see what the people in front and behind me have in their shopping trolleys. I cannot really see this on the golf course.

Just as a gap has opened up between the people and the political class or between different population groups, relations with the business sector have also suffered. Are the Swiss people no longer friendly to business?

Whenever we have identified some black sheep, we tend to generalise them. But there are black sheep everywhere, in politics as well as in business. Events such as the Swissair grounding or the 68 billion francs which the government had to give to UBS to help it survive the financial crisis erode the trust. When such a crisis has occurred it takes many years to build up a relationship of trust again. In the process, people forget about the good things that these companies did previously. They only see the ten-digit figure and forget that in the case of UBS, for example, the government actually made a profit in the end. When groups of regulars m

When groups of regulars meet around their usual table, it is often said that one of these days, none of us will get any social security. What do you think of such statements?

In such a rich country as Switzerland, it will never happen that the AHV is not paid. Retirement provision is a central pillar of our state, and we have found on numerous occasions that it is the most sensitive pillar of our social insurance system. The people have a really good feeling for what is too much and what is not. They neither consent to grand initiatives to expand the social insurance system, nor do they accept any serious cutbacks.

What is your personal assessment of the standard of the employee benefits insurance in Switzerland?

Our three-pillar system is unique and works extremely well in many regards. Financing, for example. The first pillar, the AHV, is financed as a pay-as-you-go system. What comes in on the one side goes out on the other. The disadvantage is that this money cannot be invested in order to earn a profit, but we always know exactly how much is available. And as all issues related to the AHV can be calculated very precisely, everything is transparent. As the financing system for the second pillar is different, a profit can be earned. But where a profit can be made we can also suffer a loss, and unfortunately this is often forgotten. The two pillars complement one another when it comes to financing, and together they maintain a balance. Another reason for the stability of the system is the fact that everybody pays AHV contributions. This is where the solidarity between old and young, between employers and employees, and between rich and poor comes into play. In addition to the basic insurance for all employees provided by the second pillar, employees who earn a higher salary can also be offered supplementary insurance cover. While these people pay much more into the AHV than they will ever get back in pensions, they can use the second pillar to save in order to retire in the style they are used to. Although this may sometimes be difficult to explain, it is a logical concept when we look at the system as a whole, and I believe that it is also just and proper. The third pillar completes the system as a kind of individual piggy bank.

echo-interview, June 2014, Christina Egerszegi

Our three-pillar system of retirement provision is held up as an example by many foreign countries. In Switzerland itself, however, it is coming under ever more pressure. Why these different perceptions?

Although the three-pillar system is often questioned in certain circles, the broader public does not have any doubts. The three-pillar principle is accepted. Life insurance companies are also often in the stocks. They have to earn as much income as possible, but in addition to the recipients of benefits and payers of contributions they also have to meet the legitimate demands of their shareholders. Shareholders want to participate in the profit. And if this is not considered, the whole edifice collapses.

In Switzerland there is a clear trend towards increasing the flexibility of the second pillar or the employee benefits insurance. What do you think of this development?

The state makes the rules for the mandatory insurance by way of framework laws. It has to provide supervision and ensure that the objective is reached, i.e. the payment of a pension equalling 60 % of the last salary earned. The state, however, does not have much say when it comes to the extra-mandatory insurance. To me, it is important that employers and employees together determine this framework. If employers and employees exercise their responsibility, it should be possible to make the system more flexible. There are already pension funds that do this. The rules must be stricter for the mandatory insurance, because if retirement provision is not guaranteed, the taxpayers will be required to finance supplementary benefits. I think, however, that flexibility is a very good thing for the extra-mandatory insurance.

Pension funds find themselves in stormy waters, even though the situation on the stock exchanges has improved. Keywords such as demographic trends and low interest rates come to mind. Will the pension funds – and therefore all of us – become victims of unfundable benefit promises?

The demographic trend is hardly surprising. We have known that people are growing older since the introduction of the second pillar in 1985. This must be taken into consideration, which is why reserves have to be created. The boards of trustees are obliged to make provision for demographic trends and interest rate fluctuations. But this also means that they have to be resistant to the influence of their own clientele. It is far too simple to just point the finger at politics. I often attend training courses for senior pension fund employees and I always emphasise that they themselves are responsible for making sure that the money is fine.

Christine Egerszegi, State Councillor for the canton of Aargau

The pension funds remained totally silent in the run-up to the last referendum concerning the reduction of the conversion rate a few years ago. Just as the pension funds expect us politicians to defend the system of retirement provision, I expect them to inform their contribution payers and pensioners about the real situation – that people are growing older and how pensions and reserves have performed in the past. It is the duty of pension funds to discuss these facts now, and not only before a referendum is held. They must also inform the insured that the pensions reported in pension certificates can only be paid under current conditions. If another conversion rate is adopted, these amounts are no longer guaranteed. In this context, the annual pension certificate is not an eternal promise, and pension promises are only valid for the next one or two years.

A reduction in benefits seems unavoidable, and the upcoming BVG revision also seems to be going in this direction. What do you think about the plan to increase the retirement age for women to 65?

That is self-evident. We have the same rights and the same obligations. Women live four years longer than men on average and have the same opportunities for training and education. Even though it has not yet been implemented everywhere, they are entitled to the same salary under the law. There is thus absolutely no reason why women should retire earlier. When the AHV was introduced in 1948, the same retirement age actually applied for men and women.

A good part of the cost increases that will follow on the planned BVG revision should be fi nanced by an increase in value added tax. Is this the right way to do it?

It is one possible way of doing it. We must make sure, how ever, that only a small amount is generated in this way. Value added tax is not a social tax. The advantage is that everyone pays, also the pensioners themselves, but the big disadvantage is that the people who have to use a large part of their salary to buy goods and services for daily use pay the most. This is especially true for families with children and pensioners with a small income. The trade unions are usually quick to approve financing schemes involving an increase in value added tax, but they are actually hurting their own clientele most with this approach. As the value added tax cannot be increased to build up reserves, I do not think that the proposed two percent is realistic.

Should pensioners not be expected to bear at least a small part of the costs whenever the system changes?

I am absolutely opposed to this. Nothing is left over from the mandatory pension regulated by the state. For the extra- mandatory insurance, the state is only responsible for the rules and supervision, and the benefits are determined by the employers and employees. Pensioner organisations regularly demand representation on the boards of trustees. This would be the biggest mistake they can make. If they bear co-re-sponsibility on the board of trustees, they can also be outvoted and fi nally forced to participate in any benefit reductions. If pensioners are not represented on the boards of trustees, only pension components that are paid voluntarily can be reduced, such as inflation-linked adjustments. The pension that falls due upon retirement is currently untouchable.

What developments in the employee benefits insurance do you expect following the implementation of the upcoming revision?

I hope that we will be able to put the second pillar on a good footing. This also requires a reduction in the conversion rate. Although I do not agree to reducing the conversion rate ahead, I am in favour of creating realistic conditions. We must use supporting measures to ensure that pensions are not reduced too much. My biggest concern about the second pillar is the security of the investments. We currently have to invest around CHF 630 billion in pension assets, and Switzerland offers only a limited number of secure investment options for such enormous amounts.

If you could give the pension funds in Switzerland some advice, what would you tell them?

To train the trustees and managers of pension funds to do their work responsibly – not only internally, but also externally. I was recently involved with a pension fund that has a foreign management. It is important that these people understand the way our system works and that employers also bear responsibility. We can only pay out funds that are actually available. If money is missing from the second pillar, it is not the state that has to provide support. The persons responsible for the employee benefits insurance must therefore explain the system transparently, and not only correctly assess the situation but also pass on this information to those above and below them.

Personal Profile
Christine Egerszegi
State Councillor for the canton of Aargau

Christine Egerszegi-Obrist was born in 1948. She attended the new Cantonal School Aarau, qualified as a primary school teacher and then completed Romance studies and literature at the Universities of Zurich and Lausanne. She worked as a language teacher at the district schools of Lenzburg and Mellingen and the business school of the Baden commercial association from 1971 to 1996. She started her political career with the Liberal Party of Switzerland (FDP) in 1984. She was a member of the Parliament of the canton of Aarau from 1989 to 1995. From 1990 to 1998 she was also a member of the City Council for Mellingen. She was elected to the National Council in 1995 and served as its President and the highest-ranking Swiss citizen in 2006/07. In 2007 she was the first woman from Aargau to be elected with an overwhelming majority to the Council of States.