Effective 1 January 2012, pension assets will earn interest at a minimum rate of 1.5% p.a. That is 0.5% less than the year before. The basis is the long-term average return on 7-year federal bonds.

The Federal Council has lowered the minimum interest rate on compulsory pension benefits from 2% to 1.5%. By law, the Federal Council is required to review the minimum interest rate once every two years. It does this in consultation with the Federal Commission on Occupational Pension Plans (BVG/LPP Commission) and the social partners. Given the current market environment, the Federal Council decided to review the rate again and to lower it effective 1 January 2012. Since 2002, it has thus lowered the rate from 4% to 1.5%.

The minimum interest rate is based on federal bond rates

The minimum interest rate is basically determined by the long-term average rates on federal bonds and on equity, bond and real estate market trends. The calculation method used by the BVG/LPP Commission is based on a combination of low-risk and high-risk investments. The starting point is the long-term sliding average return on 7-year federal bonds. This return corresponds to the return that could be achieved with a near risk-free bond portfolio. The Commission also takes into account the Pictet BVG Index 93 and the IPD Wüest & Partner Index. These indexes contain equities, bonds and real estate.

Liberty Flex Invest offers higher returns for supplemental pension benefits

According to the Federal Law on Occupational Retirement, Survivors' and Disability Pension Plans (BVG/LPP), employees earning at least CHF 20,880 but not more than CHF 83,520 per year are subject to compulsory benefits coverage, while the portion of an employee's earnings exceeding CHF 83,520 p.a. is covered by supplemental benefits. There is no minimum interest rate applicable to supplemental benefits – pension funds are free to set their own rate.

Managerial and executive staff earning over CHF 125,280 per year who consider the minimum return offered by their occupational pension plan as being too low, may choose a variety of investment options with Liberty Flex Invest Foundation. This increases their chance of attaining higher returns.