Pensions World

A roundup of recent worldwide news and developments in the pensions arena, by Anne Bennett, Mercer

Australia: superannuation guarantee reforms approved by lower house

Australia’s House of Representatives has approved the government’s Bill to change various aspects of the superannuation guarantee (SG).

It will be presented to the Senate early next year and is expected to become law.

At present, employees over the age of 70 are not eligible for employer SG contributions. The Bill would eliminate the age limit on employer SG contributions from 1 July 2013. The amended legislation will also bring in a phased increase in the mandatory employer contribution rate, which has been mooted since 2009.

The rate will rise from 9% to 9.25% on 1 July 2013, to 9.5% on 1 July 2014 and then increase annually in 0.5% increments until it reaches 12% on 1 July 2019.

Furthermore, for those earning below A$37,000 per year, the Bill removes the 15% tax on contributions by means of a rebate payable to the fund.

Netherlands: schemes facing benefit cuts

The Dutch social affairs minister has announced that over 100 pension schemes, including several large ones, are at risk of having to cut benefits if their funding position does not improve by the end of 2011.

These are schemes which are expected to struggle to improve their funding position sufficiently by the 2013 recovery period deadline.

The Dutch civil service union has called for mandatory benefit cuts for underfunded schemes to be postponed until the introduction of the new Pensions Agreement in 2014. The union expects that by then a more stable discount rate could be used, which is likely to improve schemes’ funding position.

Switzerland: pension interest guarantee rate lowered

The Swiss government has set the minimum interest rate for active members’ accounts in second pillar pension schemes at 1.5% for 2012.

This is a reduction from the current rate of 2% and follows the recommendation of the occupational pensions commission. The rate is felt by some commentators to be still too high.

Although relatively stable, Swiss pension schemes have struggled to maintain funding levels in recent years and there is evidence of a move towards more diversification of assets in an attempt to increase returns.