Occupational pension plans, obligatory since 1985, have considerable economic and social significance in Switzerland. The savings, which are now managed by pension funds and insurance companies, far exceed gross domestic product (GDP) and the reserves of the Swiss National Bank (SNB).
- Deutsch Der verborgene Schatz der Schweizerinnen und Schweizer
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The occupational pension plans, along with the state-run old-age pension scheme, aim to maintain to a large extent a person’s living standards in the event of retirement, the death of a partner or invalidity.
Today, around 4.1 million workers are attached to pension funds and insurance companies. More than 1.1 million draw benefits from the professional pension plan.
Over recent decades, the second pillar of Switzerland’s three-pillar pension scheme has taken on a large economic dimension: in 2016, occupational pension funds for the first time exceeded CHF1 trillion ($1.04 trillion). At the end of 2016, the figure was CHF1.029 trillion. Some 80% of savings is managed by pensions schemes, the rest by insurance companies.
In comparison, the reserves of the SNB – which have increased dramatically in recent years as a result of the bank’s efforts to counter the strengthening franc – were less than CHF690 billion at the end of 2016. Swiss GDP last year was CHF658 billion.
Given these figures, the old-age pension scheme looks like a poor cousin. The capital of the first pillar amounts to barely CHF44 billion – and that despite the fact that the state insurance scheme plays an even more important role given that it currently covers 40% of the average income of pensioners while the occupational pension plans covers 30%.
The difference is down to the old-age pensions scheme being based on a system of redistribution: the contributions of insured employees and of employers are used to finance the pensions of people who have retired.
The occupational pension plans on the other hand are managed according to a system of capitalisation: the contributions are determined and paid out for each insured person individually as soon as the person retires. On average a person has amassed CHF100,000 in their pension fund, while pensioners have CHF300,000: a trove which many people don’t think about but which makes a large contribution to Swiss people’s wealth.
Heated political debates about the two pillars have been waged for a long time: while those on the left consider the old-age pension scheme a priority, those on the right lay more importance on the occupational pension plans.
However, the advantage of both systems is that they complement each other in the face of major economic and social challenges. For example, the ageing of society is putting pressure mainly on the old-age pension scheme because no large reserves are foreseen for financing current pensions.
The considerable capital of the occupational pension plans on the other hand is more exposed to crises on the financial markets. As in 2007, when the reserves took a heavy hit.
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