Pension debate looms large in run-up to election

Working beyond 65 is one of the more controversial proposals Keystone Archive

Talk of raising the retirement age to 67 along with reduced payouts has placed Switzerland’s pension system at the top of the list of voter concerns.

Last month more than 25,000 people protested in the Swiss capital, Bern, against government proposals to slash retirement benefits.

A recent poll showed 42 per cent of the electorate cited pensions as the most important issue ahead of parliamentary elections on October 19.

Swiss pensions are under pressure from a range of factors.

Firstly, longer life expectancy and slowing birth rates, mean there are fewer young people in the workforce to pay into the state pension fund.

In addition, company and private pension schemes have been hit by the weak stock market, which has affected funds invested in equities.

According to the interior minister, Pascal Couchepin, these factors threaten an impending crisis, requiring far-reaching measures.

Pension reforms

Proposed reforms include an increase in VAT payments, and cutting pension payouts by linking them to inflation and removing the calculated salary increase. This would lead to reductions of SFr20-40 a month to the state pension.

Last month parliament approved plans to raise women’s retirement age from 63 to 65 by 2009.

Perhaps most controversially of all, Couchepin has suggested raising the retirement age from 65 to 67 by 2025.

Attempts to reduce state pensions have met with fierce opposition from trade unions across Europe – and Switzerland is no different.

Collette Nova of the Swiss Federation of Trade Unions argues that forcing everyone to work longer, regardless of the type of job they do, is unfair.

“People with strenuous jobs on low and middle incomes aren’t physically able to work up to the current retirement age, let alone two years longer. But they have to because they often just rely on the state pension,” she told swissinfo.

Retirement age

Unions claim employers are often reluctant to hire people approaching retirement age, and raising the retirement age will only make the problem worse.

According to Bern’s regional employment office, around a quarter of jobless over the age of 50 have been out of work for more than a year. This compares with just under seven per cent of 24-50 year olds.

Raising the retirement age would simply mean more people claiming unemployment benefit, says Herbert Kaestner, co-president of the Swiss Senior Council, a lobby group for older people,

“Really it is just a change of money flow: it saves money on the state pension side, but not for the government overall,” he said.

Martin Janssen, a professor of finance at the University of Zurich, says one solution might be ensure all working lives are of a fixed length.

People starting work at 18 would retire earlier than those who begin at 25, but everyone would contribute to pension funds for the same length of time.

Weather the storm

The unions, however, are playing down the threat of an impending crisis. Collette Nova says the state pension has already withstood a range of economic and demographic changes without the system failing since its creation in 1948.

The impact of growing pensioner numbers could easily be countered by an economic upswing, say unions.

But the interior ministry is convinced drastic action is required, even if it is at the expense of public opinion.

“[Couchepin] would be much more unpopular if we had serious financial troubles in our welfare system,” says Jürg Brechbühl, deputy director of the Federal Office for Social Security.

“In order to avoid a big crisis we want to take the solutions that are necessary as early as possible.”

However, Janssen says the level of opposition to the latest set of proposals probably means they will never become law.

“But the important thing is that people will now begin to consider other possible solutions.”

swissinfo, Joanne Shields

Key facts

Switzerland has a so-called “three pillar” pension system: the state pension (obligatory contribution), company pensions (obligatory contribution for salaries over SFr25,000 per year), and private pensions (optional).
The state pension was created in 1948.
According to the Federal Office for Social Security, at the time there were 6.5 workers for every pensioner; this year there are four and in 2030 there will be only two.
Parliament approved the 11th revision to the pension scheme in September. This includes raising women’s retirement age from 63 to 65 by 2009.