Pensions cover an ever smaller share of the final salary

Expected retirement benefits in Switzerland have fallen by 16% since 2002. That is the calculation of a study by the consultancy VermögensZentrum, which puts the difference at 12,260 francs a year for the profile examined.

The study takes as its reference a 55-year-old with an annual income of 120,000 francs. At 65 that person will receive a combined pension of 62,660 francs a year. In 2002 the same profile would have received 74,920.

The two pillars are moving in opposite directions. Occupational pension benefits have collapsed by 40% over the period. The state pension, by contrast, has grown by a third and now reaches 32,760 francs, including the thirteenth monthly payment that will be made for the first time at the end of 2026.

The conversion rate at the centre

The imbalance is explained by the different mechanism of the two systems. The state pension has been adjusted for inflation. The conversion rate used to calculate second-pillar benefits, by contrast, has fallen without interruption, from 6.00% ten years ago to 5.26% today.

Pension funds lowered that parameter to account for rising life expectancy and long-standing low interest rates. The stability of their balance sheets has been secured by reducing what future pensioners receive.

The result can be read in the replacement rate. Someone earning 100,000 francs now receives about 51% of their final salary, against 62% in 2002. On an income of 150,000 francs the cover falls to 42%, against 58% twenty-four years ago. The original aim of the three-pillar system was for the first and second pillars together to provide 60% of final income.

Confidence has weakened accordingly. Only a quarter of respondents believe state pension benefits will be secure in twenty years, and the share rises to 30% for occupational provision. The main worries concern the cost of care in old age and the financial sustainability of the state pension.

On what to do about it, however, there is no agreement at all. 68% of respondents reject raising the standard retirement age, while the Federal Council points to the AVS 2030 reform as the way forward. 58% remain convinced they can maintain their standard of living by combining the state pension, occupational provision and personal assets.