KOF-NZZ survey reveals that economists are in favour of rule-based adjustments to the retirement age

Another question asked the economists to indicate which measure they considered the most suitable to improve the AHV’s financial situation. 63 per cent of the economists surveyed believe that raising the statutory retirement age is the most appropriate measure (see chart G 8). The second and third most frequently cited measures were to increase revenues by raising federal government contributions or VAT revenues (14 per cent) or by raising payroll contributions (12 per cent). Pension cuts, on the other hand, are being considered less.

The old-age pension scheme in Switzerland is based on both the pay-as-you-go system (basis of the first pillar, AHV) and the funded system (basis of the second pillar, pension fund). The first pillar is based on the principle of redistribution, as those currently in employment pay for those insured under the AHV at retirement age. Since a fixed percentage of salary is paid into the AHV and a maximum level of pension is fixed, the AHV tends to involve redistribution from high earners to low earners. In the second pillar, on the other hand, everyone saves individually for their pension pot. Compared with the funded system, the pay-as-you-go scheme is more profitable – from an economic point of view – the higher the population, and wage growth is in line with interest rates in the capital markets. The economists were asked in the survey whether they considered the current balance between the two pillars to be appropriate. 59 per cent of the economists surveyed think that the current weightings of these two elements are almost optimal (see chart G 9). The prevailing view among the remaining economists is that the pension fund element should be strengthened at the expense of the AHV.  

Minimum conversion rate and retirement age to follow automatic mechanism

Pension funds are also facing financial challenges as a result of increasing life expectancy and the currently low level of interest rates, which is why reforms are being debated in parliament. One of the reforms involves reducing the minimum conversion rate. This rate determines how much of the money saved is paid out as a pension each year once the statutory retirement age is reached, and it can currently only be adjusted by law. An alternative to a static, legally fixed rate would be a dynamic, formula-based adjustment under which, for example, life expectancy and the technical interest rate could be taken into account. A majority of the economists (67 per cent) would be in favour of the minimum conversion rate following an automatic mechanism and thus not being dependent on political decisions (see chart G 10). 26 per cent, on the other hand, want to stick with the current approach. Hardly any of the survey respondents would be in favour of abolishing the minimum conversion rate so that the pension funds could set it independently.

The retirement age is also laid down in law. In order to change this, the Young Liberals of Switzerland have launched an initiative that is currently pending before parliament. This initiative calls for the retirement age to be automatically adjusted in line with the life expectancy of the Swiss resident population over time. While 56 per cent of survey respondents would agree in principle to a rules-based adjustment, 40 per cent would prefer a statutory adjustment (see chart G 11).  

SNB distributions should not be allocated to the AHV

A further initiative concerning the AHV is currently at the signature-collection stage. The SNB initiative launched by the Swiss Trade Union Federation demands that if the Swiss National Bank (SNB) makes a large distributable profit, some of it should be allocated to the AHV stabilisation fund. The distributions currently allocated to the federal government and the cantons would remain unaffected. A majority of 58 per cent of survey respondents would reject this initiative for economic reasons. This is probably because the initiative could compromise the independence of the SNB by mixing monetary policy with social policy. 28 per cent, on the other hand, see the initiative as beneficial and 7 per cent are indifferent (see chart G 12).