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Switzerland drops in international pension ranking

Silver generation: the Swiss pension system remains strong, despite some issues. Keystone

This content was published on October 23, 2017 - 21:16 and agencies

The Swiss pension system has ranked eighth in an annual international study looking at the sustainability and efficiency of retirement schemes. This represents a drop of four places in the past two years, largely driven by sustainability issues.

The Global Pension Index, published by consulting group Mercer, ranks 30 countries according to a methodology based on adequacy (the design of the system), sustainability (breadth of coverage, long-term prospects) and integrity (governance and regulation).

While it scores highly on the integrity side, the Swiss slide to eighth position was largely driven by weaker scores on the sustainability of its model, Mercer announced Monday.

Concretely, it said, it was due to a new indicator added this year looking at economic growth over the past three years: Switzerland’s large pension assets but slow rate of annual growth (this year predicted to be less than 1%) means that it did badly from the change.

The ranking thus places the alpine nation in an international category on a par with advanced economies such as Canada and the Scandinavian states: according to Mercer, “a system that has a sound structure, with many good features, but has some areas for improvement”.

Elaborating on this, the report found that possible ideas for improving the overall score could include raising the pension age over time; increasing the rate of home ownership; and reversing the preferential tax treatment of lump sum payments in comparison to pension payments.

Denmark topped the ranking for the sixth year running, and was followed by the Netherlands and Australia.

Resistant to change

The Swiss pension system is a perennial topic for political debate, and several of these issues have already been proposed in a far-reaching reform that was rejected by voters last month.

In an effort to boost the long-term sustainability of the system to compensate for an ageing society, Interior Minister Alain Berset had proposed to raise womens’ retirement age to 65 (in line with men), as well as slightly raising VAT rates.

Voters rejected the reforms by a margin of 53% to 47% but have not put the issue to bed: if nothing is changed, Berset has said, the AVS system will be empty by 2030.

Opponents on the right want a less complex updating of the system; on the left, many do not want to see the retirement age for women being raised.

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