Evidence from Eleven Countries
Edited by Giuliano Bonoli and Toshimitsu Shinkawa
Chapter 7: Switzerland: Adapting Pensions within Tight Institutional Constraints
Giuliano Bonoli INTRODUCTION The Swiss pension system is often praised in international comparisons, for its capacity to combine successful needs coverage with a solid financial basis. This combination of what are sometimes conflicting goals is achieved thanks to a system structured around three pillars of provision. The first one is universal and has the task of providing all retirees with a minimum income level above the poverty line; the second pillar is compulsory for most employees, is fully funded, and provides earnings-related benefits. Finally, the third pillar is a purely voluntary top up encouraged through generous tax concessions. The multipillar character of the system and the inclusion of both pay-as-you-go and funded financing are its key strengths. Praise notwithstanding, the Swiss pension system does not escape the effects of developments like population ageing or the transformation of labour markets that are putting pressure on pension systems throughout the industrial world. Expenditure on its pay-as-you-go financed first pillar is expected to soar over the next two to three decades at a much higher rate than scheme receipts. The fund of the basic pension has been making losses in several of the last few years, and a key objective of current reform initiatives is to guarantee the solvency of the scheme in the medium to long term. Population ageing, however, does not affect the basic pension only. Second pillar occupational pensions have to deal with the issue of higher life expectancy at the age of retirement (typically between 62 and 65). As...
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