Due to very low interest rates and increasing life expectancy in Switzerland, pension funds remain under pressure, a new study shows.
Even though surveys show that retirees in Switzerland are the happiest in Europe, a new study draws a bleaker picture.
That is what the VZ Retirement Barometer, which was released on August 8th, indicates.
Wile the first pillar (AHV/AVS) payouts have remained relatively constant over the years, and will even increase slightly with the introduction of the 13th pension starting in 2026, overall, pension funds have massively cut their benefits.
READ ALSO: What will Switzerland’s new ’13th pension’ mean for you?
Specifically, pension funds are now 40 percent lower than in 2002, according to the study.
The reasons for this include low or possibly soon-to-be negative interest rates, rising life expectancy, as well as the failed reform of the occupational pension (second-pillar) system, designed to enable pensioners to maintain their standard of living in retirement.
In a September 2024 referendum, over 67 percent of Swiss voters turned down the government’s proposal to overhaul the scheme; voters were swayed by the revelation that Switzerland’s Social Insurance Office had miscalculated projected spending for the old-age pension.
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Why is the forecast so grim?
Second pillar pensions are supposed to equal 60 percent of the final salary, but due to dwindling funds they no longer do.
In concrete terms, a person currently earning 100,000 francs a year will receive around 51 percent of their final salary as a pension upon retirement. With an income of 150,000 francs, the pension share even drops to 42 percent.
As an example, a 55-year-old man with an annual income of 120,000 francs could still expect a pension of 74,920 francs in 2002.
But by 2025, this figure will be only 62,860 francs.
The above example refers only to someone who has a ‘full pension’ in Switzerland – which means they have paid into the Swiss system for at least 44 years.
Many foreigners in Switzerland will not have been working in the country for long enough to qualify for the full pension – their pensions will therefore be lower, based on the amount they have paid in over the years.
However the general trend of falling payments would apply also to the lower pensions of foreigners.
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“The pensions actually paid out are on average around 10 percent lower than forecast,”according to the report.
And this trend is likely to continue.
The recent interest rate cut by the Swiss National Bank (SNB) to zero percent has further exacerbated the situation.
And the increase in life expectancy also means that occupational pensions will continue to wane, as people live — and deplete the funds — longer.
READ ALSO: How much money do you need in Switzerland to retire comfortably?
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What’s the deal with foreigners and Swiss pensions?
This study focused specifically on people who have worked in Switzerland, and contributed into the social security system, continuously for 44 years – the number of years required for full pension benefits.
In practice, most of those people will be Swiss, or at least have grown up in Switzerland.
Most foreigners who have moved to Switzerland to work don’t manage to fulfil this condition, unless they moved when they were in their 20s, and are more likely to have ‘blended careers’ – ie a some years working in Switzerland and some years working in another country or countries.
Their payouts will be based on how long they have been in full employment and paid into the Swiss scheme, but are generally significantly lower than the full pension amounts.
If you want to know exactly what to expect in a way of Swiss pension, you can ask your cantonal social security office.
READ ALSO: Everything you need to know about retiring in Switzerland
