‘Open Pension’ Meets the Challenges of the Swiss Pension System

The Swiss pension system is based on three pillars: state pension (AHV/IV), occupational pension (pension funds/BVG) and individual pension (3rd pillar). Although this system is often praised internationally as exemplary, it faces significant challenges that threaten its stability and efficiency. In the following interview, a detailed analysis of these challenges is presented.

thebroker speaks with Stephanie Wickihalder, President of the Swiss Fintech Innovations (SFTI) association, and Michael Müller, head of the Open Pension working group and partner at Acrea.

What was the Swiss Fintech Innovations (SFTI) association founded for?

Stephanie Wickihalder (SW): SFTI was founded in 2016 as an independent association of Swiss financial market participants. Its objectives are to promote and strengthen cooperation and digital innovation in the financial services industry.

Who are its members?

SW: Our members are Swiss financial market participants open to innovation, in particular banks and insurance companies, but also consulting service providers, technology, financial market infrastructure and software providers, as well as other market players. Each member has the opportunity to suggest project ideas and initiate working groups.

What exactly is the open pension concept?

Michael Müller (MM): The Open Pension Concept is an extension of the open finance concept and focuses on the secure and standardised exchange of personal pension data. It puts people first by enabling them to share their personal pension data securely with trusted third-party providers via digital interfaces (APIs) – but only with their express consent, of course.

Objectives of the Open Pension Concept – Greater transparency made simple: People should have much easier access to a comprehensive view of their pension situation, with data from all three pillars aggregated with just a few clicks – wherever the insured person wants.

Promoting more self-determination: insured persons can release their pension data for targeted analyses or simulations in order to make well-informed (financial) decisions.

Promoting innovation and competition: by opening up the data, insurance companies, banks and fintechs can develop innovative services, such as forecasts for retirement provisions or simulations for various scenarios (e.g. part-time work or early retirement).

Which insurers support Open Pension?

MM: There is noticeable interest on the part of insurers, and we are in regular contact. In addition to discussions and feedback, there are also initial talks about possible pilot projects that could serve as important next steps. In principle, all insurers agree with the goals of greater pension transparency and self-determination. However, many are not only observing developments in the industry, but also the political course set in Bern.

Why don’t all insurers support this concept?

SW: Insurance companies have often set up their own pension portals, i.e. proprietary solutions. The Open Pension concept, on the other hand, is based on broad standards that increase transparency and efficiency in the market for the benefit of the insured (end customers). By promoting data accessibility, costs will ultimately also decrease.

What is the main objective of the ‘Open Pension’ position paper from Swiss Fintech Innovations?

MM: In December 2022, the Federal Council instructed the Federal Department of Home Affairs (FDHA) to examine how digital access to pension data can be appropriately promoted. The SFTI’s ‘Open Pension’ position paper contributes to this project. The paper offers strategic options for opening up the second pillar and thus supports the examination commissioned by the Federal Council of how digital access to pension data can be appropriately promoted.

What challenges does the ‘Open Pension’ concept address in the Swiss pension system?

MM: The ‘Open Pension’ concept addresses the central challenge of the knowledge gap in the area of pensions. Many Swiss people know little about their pension situation and the effects of decisions such as part-time work. This leads to insecurity and a feeling of powerlessness. Complex technical terms and a lack of personalised addressing further complicate access.

What role do pension tracking systems (PTS) play in European countries and how could they be implemented in Switzerland?

MM: Pension tracking systems (PTS) provide transparency and an overview of retirement provisions in many European countries by combining data from various sources. Examples such as Belgium (mypension.be) show that up to 36 % of the population use PTS every year to view their pension entitlements and create simulations. In Switzerland, a PTS could be implemented through standardised APIs, as advocated by the SFTI Open Pension working group.

What strategic implementation options for a PTS are presented in the position paper?

MM: Open Pension consists of three basic building blocks that form the Open Pension System: an optional legal framework, governance and the ecosystem (i.e. a network of participants in a data exchange architecture). In the position paper, we present five strategic options for implementing the ecosystem. The options can be categorised into two different types.

Type 1 includes central platforms that serve as a hub for networking and data flow between the parties involved.

Type 2 is based on the principle of ‘self-sovereign data sharing’, in which individuals share their pension data directly (without a platform) (e.g. via an e-ID wallet).

The position paper discusses and evaluates the five options in detail.

What conditions are necessary to enable the opening of the second pillar in Switzerland?

MM: A public-private governance model should promote cooperation between the state and industry. Such governance is a necessary prerequisite for aligning interests. On this basis, voluntary cooperation and self-regulation by the players can minimise further regulatory efforts and create a flexible, innovative environment. The next step is for politicians to take a clear stand in favour of opening up and for the PTS to initiate the next steps.

Will the SFTI association’s initiative receive any form of political support for the open pension project?

SW: SFTI is in contact with politicians and authorities on this and other topics. The answer to the interpellation by Marcel Dobler on a PTS was given this week. We are currently examining the answer given by the Federal Council and discussing the next steps with industry representatives.

Stephanie Wickihalder has been working in the financial industry for 20 years, in the areas of investment banking, wealth management and digitalisation. Since 2018, she has been President of the Swiss Fintech Innovations (SFTI) association, which brings together the key players in digitalisation in the Swiss banking, insurance, technology and consulting sectors. She also holds several advisory mandates in the fintech sector, is deputy managing director of the Liechtenstein Bankers Association and a guest lecturer at the University of Zurich and the HWZ University of Applied Sciences in Business Administration in Zurich.

Michael Müller is a partner and co-founder of Acrea, a boutique management consulting firm in Zurich. Michael has over 20 years of experience in the digitalisation of banks and insurance companies. As an active member of Swiss FinTech Innovations (SFTI), he is involved in projects such as Open Pension, which aims to promote transparency and user-friendliness in the pension system.

Also read: Occupational pension provision operating statement 2023: Pax offers high financial security in uncertain times