The Swiss Multi-Pillar Pension System: Triumph of Common Sense?
The authors provide a detailed study of the Swiss pension system, analyzing its strengths and weaknesses. The unfunded public pillar is highly redistributive. It has near universal coverage, a low dispersion of benefits (the maximum public pension is twice the minimum), and no ceiling on contributio...
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| Format: | Publications & Research |
| Language: | en_US |
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World Bank, Washington, DC
2015
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| Subjects: | |
| Online Access: | http://hdl.handle.net/10986/21372 |
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okr-10986-21372 |
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oai_dc |
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Digital Repository |
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Foreign Institution |
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Digital Repositories |
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World Bank Open Knowledge Repository |
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World Bank |
| language |
en_US |
| topic |
accounting accounting rules adverse effects affiliate affiliates annuity annuity conversion annuity conversion factor asset segregation asset valuation assets auditors bank accounts bankruptcy benchmark benefit formula bonds consolidation contribution period contribution rate contribution rates cost of living debt dependency ratio deposits disability insurance disability pensions dividends economic depression economic growth economic problems equity investments financial performance financial resources foreign assets GDP housing incentives to save income income groups indexation individual accounts inflation information disclosure inheritance insurance companies interest rate interest rates internal controls investment returns labor force legislation liability management life annuity life expectancies life expectancy life insurance life insurance companies lifetime earnings liquidity minimum funding requirement mortgages mutual funds normal retirement age occupational pension plans oil operating costs payroll taxes pension fund pension funds pension plan pension plans pension schemes pension system pension systems pensioners pensions personal savings poverty line private pension private pension funds private pillar private pillars property ownership public pillar public pillars redistributive effects regulatory framework replacement rate replacement rates retirees retirement retirement ages retirement benefits |
| spellingShingle |
accounting accounting rules adverse effects affiliate affiliates annuity annuity conversion annuity conversion factor asset segregation asset valuation assets auditors bank accounts bankruptcy benchmark benefit formula bonds consolidation contribution period contribution rate contribution rates cost of living debt dependency ratio deposits disability insurance disability pensions dividends economic depression economic growth economic problems equity investments financial performance financial resources foreign assets GDP housing incentives to save income income groups indexation individual accounts inflation information disclosure inheritance insurance companies interest rate interest rates internal controls investment returns labor force legislation liability management life annuity life expectancies life expectancy life insurance life insurance companies lifetime earnings liquidity minimum funding requirement mortgages mutual funds normal retirement age occupational pension plans oil operating costs payroll taxes pension fund pension funds pension plan pension plans pension schemes pension system pension systems pensioners pensions personal savings poverty line private pension private pension funds private pillar private pillars property ownership public pillar public pillars redistributive effects regulatory framework replacement rate replacement rates retirees retirement retirement ages retirement benefits Queisser, Monika Vittas, Dimitri The Swiss Multi-Pillar Pension System: Triumph of Common Sense? |
| geographic_facet |
Switzerland |
| relation |
Policy Research Working Paper;No. 2416 |
| description |
The authors provide a detailed study of the Swiss pension system, analyzing its strengths and weaknesses. The unfunded public pillar is highly redistributive. It has near universal coverage, a low dispersion of benefits (the maximum public pension is twice the minimum), and no ceiling on contributions. Low-income pensioners receive means-tested supplementary benefits. Payroll taxes are low, but government transfers cover 27 percent of total benefits. Total benefits amount to 9.1 percent of GDP, equivalent to 15.2 percent of covered earnings. The funded private pillar was made compulsory in a defensive move against the relentless expansion of the public pillar. The compulsory pillar stipulates minimum benefits in the form of age-related credits, a minimum interest rate on accumulated credits, and a minimum annuity conversion factor, aimed to smooth changes in interest rates over time. Low-income workers are not required to participate in the second pillar. The first and second pillars as well as supplementary benefits are admirably integrated. Company pension plans are free to set terms and conditions in excess of these minimums, and most offer benefits exceeding obligatory levels. The second pillar has accumulated large financial resources, equivalent to 125 percent of GDP. Investment returns have historically been low, but a shift in asset allocation in favor of equities and international assets has increased reported returns in recent years. The third (voluntary) pillar covers self-employed workers and others not covered by the second pillar. It plays a rather small role in the system. Many of the positive features of the Swiss pension system are not due to some grand original design but are instead the result of periodic revisions. In large part they reflect the collective common sense of the Swiss people in voting for stable and fiscally prudent social benefits. However, the Swiss system also has some weaknesses. As in many other countries, the public pillar faces a deteriorating system dependency ratio, due to demographic aging and a large increase in disability pensions. The second pillar is fragmented (more than 4,000 funds with affiliates), lacks transparency, and has achieved low investment returns. |
| format |
Publications & Research |
| author |
Queisser, Monika Vittas, Dimitri |
| author_facet |
Queisser, Monika Vittas, Dimitri |
| author_sort |
Queisser, Monika |
| title |
The Swiss Multi-Pillar Pension System: Triumph of Common Sense? |
| title_short |
The Swiss Multi-Pillar Pension System: Triumph of Common Sense? |
| title_full |
The Swiss Multi-Pillar Pension System: Triumph of Common Sense? |
| title_fullStr |
The Swiss Multi-Pillar Pension System: Triumph of Common Sense? |
| title_full_unstemmed |
The Swiss Multi-Pillar Pension System: Triumph of Common Sense? |
| title_sort |
swiss multi-pillar pension system: triumph of common sense? |
| publisher |
World Bank, Washington, DC |
| publishDate |
2015 |
| url |
http://hdl.handle.net/10986/21372 |
| _version_ |
1764448071639367680 |
| spelling |
okr-10986-213722021-04-23T14:04:01Z The Swiss Multi-Pillar Pension System: Triumph of Common Sense? Queisser, Monika Vittas, Dimitri accounting accounting rules adverse effects affiliate affiliates annuity annuity conversion annuity conversion factor asset segregation asset valuation assets auditors bank accounts bankruptcy benchmark benefit formula bonds consolidation contribution period contribution rate contribution rates cost of living debt dependency ratio deposits disability insurance disability pensions dividends economic depression economic growth economic problems equity investments financial performance financial resources foreign assets GDP housing incentives to save income income groups indexation individual accounts inflation information disclosure inheritance insurance companies interest rate interest rates internal controls investment returns labor force legislation liability management life annuity life expectancies life expectancy life insurance life insurance companies lifetime earnings liquidity minimum funding requirement mortgages mutual funds normal retirement age occupational pension plans oil operating costs payroll taxes pension fund pension funds pension plan pension plans pension schemes pension system pension systems pensioners pensions personal savings poverty line private pension private pension funds private pillar private pillars property ownership public pillar public pillars redistributive effects regulatory framework replacement rate replacement rates retirees retirement retirement ages retirement benefits The authors provide a detailed study of the Swiss pension system, analyzing its strengths and weaknesses. The unfunded public pillar is highly redistributive. It has near universal coverage, a low dispersion of benefits (the maximum public pension is twice the minimum), and no ceiling on contributions. Low-income pensioners receive means-tested supplementary benefits. Payroll taxes are low, but government transfers cover 27 percent of total benefits. Total benefits amount to 9.1 percent of GDP, equivalent to 15.2 percent of covered earnings. The funded private pillar was made compulsory in a defensive move against the relentless expansion of the public pillar. The compulsory pillar stipulates minimum benefits in the form of age-related credits, a minimum interest rate on accumulated credits, and a minimum annuity conversion factor, aimed to smooth changes in interest rates over time. Low-income workers are not required to participate in the second pillar. The first and second pillars as well as supplementary benefits are admirably integrated. Company pension plans are free to set terms and conditions in excess of these minimums, and most offer benefits exceeding obligatory levels. The second pillar has accumulated large financial resources, equivalent to 125 percent of GDP. Investment returns have historically been low, but a shift in asset allocation in favor of equities and international assets has increased reported returns in recent years. The third (voluntary) pillar covers self-employed workers and others not covered by the second pillar. It plays a rather small role in the system. Many of the positive features of the Swiss pension system are not due to some grand original design but are instead the result of periodic revisions. In large part they reflect the collective common sense of the Swiss people in voting for stable and fiscally prudent social benefits. However, the Swiss system also has some weaknesses. As in many other countries, the public pillar faces a deteriorating system dependency ratio, due to demographic aging and a large increase in disability pensions. The second pillar is fragmented (more than 4,000 funds with affiliates), lacks transparency, and has achieved low investment returns. 2015-02-02T20:50:53Z 2015-02-02T20:50:53Z 2000-08 http://hdl.handle.net/10986/21372 en_US Policy Research Working Paper;No. 2416 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper Switzerland |