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Rethinking the Welfare State

The Political Economy of Pension Reform

Edited by Martin Rein and Winfried Schmähl

In this book a distinguished group of contributors discuss the changing political economy of pension reform. They focus on those countries which have launched a significant reframing of their pension system. Each chapter provides a detailed review of recent pension reforms and offers institutional evidence of the extent to which these reforms suggest a redirection of the welfare state towards a more public-private mix of policies. The countries were selected to represent the variety of new directions which mature industrial countries as well as countries in transition have taken.
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Chapter 4: The Institutionalization of the Swiss Multi-pillar Pension System

Giuliano Bonoli


Giuliano Bonoli INTRODUCTION Amidst worldwide concern over the ‘demographic time bomb’ and heated debates on ‘pension crises’ and pension reforms, Switzerland stands out, with a few other industrial countries, as one whose pension system is unlikely to experience major disruption as a result of population aging. Its three-pillar pension system, which comprises a pay-as-you-go universal basic pension, a tier of fully funded compulsory occupational pensions and fiscal incentives to buy personal pensions, seems particularly well suited to withstand demographic pressures while at the same time guaranteeing reasonable pension coverage on a universal basis. This positive assessment of the Swiss approach to old age income security is found in the international literature on pensions. Switzerland’s multipillar pension system closely resembles the ideal type put forward by international agencies such as the World Bank (for example, 1994). Moreover, in projections of public pension expenditure, Switzerland stands out for a comparatively low expected increase in the proportion of GDP that will be needed to finance retirement in 20–30 years (Bonoli 2000, p.18). Finally, an extremely positive view of the Swiss system is also found in what is probably the most comprehensive study on Swiss pensions carried out by international observers, which goes as far as suggesting that the system may be seen as the ‘triumph of common sense’ (Queisser and Vittas, 2000). Such favourable evaluations of the Swiss pension system may come as a surprise to those who know well Swiss political institutions and the hurdles that policies need to clear before...

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