Opinions - 25.07.2018 - 00:00 

Pension provision: Raising the retirement age?

Substantial adjustments to the Swiss pension system are necessary to put the three-pillar model on a solid foundation in the long term. Taking our neighbouring countries into consideration, one of these adjustments is an increase in the retirement age. An opinion piece by Martin Eling.
Source: HSG Newsroom

25 July 2018. Following last year's defeat on “Altersvorsorge 2020” (a pension reform proposed for 2020), the political signals were initially not encouraging. Following the rejection of the comprehensive reform package, it was not surprising that pension provision was broken up into smaller packages. However, with regard to the billions in redistributions taking place there, it is completely wrong to treat the AHV (old-age and survivor's insurance, or OASI) as the most pressing problem and push occupational pension provision to one side. It is a little sobering to think that politicians cannot come up with anything better than to fill AHV’s billion-franc hole than with taxpayers' money. The negative culmination of this development was certainly AXA's withdrawal from the full occupational provision insurance model, a shockwave that hopefully also convinced the last politicians in Bern that reform is urgently needed; this was a clear indication that substantial adjustments are necessary in the near future if we want to get our highly internationally-acclaimed three-pillar pension provision model on a solid footing.

Positive signs for a higher pension age

Now that almost a year has passed, the positive signs are increasing. A change in public opinion is indicated by the Thurgau Chamber of Industry and Commerce’s latest survey, in which a majority of the population said that an age of 65 would be acceptable. Retirement age has always been a big taboo, but now even a majority of those surveyed favour a gradual increase of the retirement age to 66. These are very important signs for this discussion’s further development. The clear majority of our neighbours have already set the retirement age at 67 or older. In Germany, for example, the retirement age will be gradually raised to 67 by 2027, and a discussion regarding raising the retirement age to 70 is already taking place. In Italy, the retirement age of 67 will be in place as early as 2021; further measures towards an even higher retirement age have already been decided. In Denmark, the retirement age has a direct relationship with life expectancy, meaning a retirement age of 70 years is forecast for 2040 and 72 for 2050; and hardly anyone protests this.

Urgent measures are now required

One can recognise from these examples how different the backgrounds and discussions in our neighbouring countries are. Despite the intensive reform debate of recent years, it cannot be overlooked that Switzerland continues to be in a position for which we are envied by our neighbours: an OASI fund filled to the brim, whose income in the extraordinarily good stock market year 2017 can even make up for a negative apportionment result in the billions; an occupational pension plan that has accumulated assets in excess of Switzerland's GDP and a third pillar, the size of which is not even known, but which is also estimated to be in the hundreds of billions. In this respect, our pension provision is in a good place. However, if we want to be able to continue saying this in 2025 or 2030, urgent measures are now required. And there is more to these measures than using tax money to crank up another large redistribution mill. Until now, the Swiss have preferred to pay more, either in the form of higher wage contributions or higher taxes. A focus on the retirement age is also interesting because, with an enormously high employment rate among older employees, Switzerland has a lot of potential for longer working lives. And at the same time, it also has the potential to effectively absorb possible social hardship cases for people who can no longer work. The current discussion about a higher retirement age is therefore very welcome.

Prof. Dr. Martin Eling is Director of the Institute of Insurance Economics and Professor in Insurance Management at the University of St. Gallen.

photo: photocase/nerek