How to become a happy retiree in Switzerland?

Switzerland has been leading the regular Natixis Global Asset Managent Global Retirement Index survey for several years now. The year 2023 is no exception. This rating is compiled on the basis of an analysis of 150 countries, taking into account primarily the quality of life and financial security. In 2023, as in previous years, Switzerland retained its leadership.

Suffice it to say that the size of the average pension in European countries is many times less than in the Alpine country. And if we take into account full payments including voluntary insurance, then the gap in the level of provision of pensioners in Switzerland and the rest of Europe is estimated by orders of magnitude. Analysts explained the success of Switzerland by the developed economy combined with a strong financial system, which allows pension funds to invest in the market and earn for their clients a really good increase in pension.

Social policy also plays its role, providing both universal access to health care and other public goods, and continuous investment in infrastructure and technology. However, nothing is perfect. As the report notes, Switzerland also has problems with pension provision. In particular, the researchers paid attention to the marked appreciation of the Swiss franc as a result of the Central Bank of the Confederation's refusal to support a fixed exchange rate of the franc against the euro.

This measure hurt the pockets of depositors, including those of retirement age. In addition, the negative yield on deposits introduced in Switzerland negatively affects the propensity to invest in voluntary pension insurance programs (in Switzerland, these programs constitute the so-called "third pillar" of the entire pension insurance system).

The foundation of happiness

The pension system, as it exists today, was established in Switzerland following a federal referendum held on December 3, 1972. The system is based on three pillars (Säulen), each of which has its own specific tasks. The first pillar, simplistically speaking, constitutes the basic public pension insurance and is based on the "Old Age and Survivors Insurance Act" .

The "first pillar" fund is formed from the solidarity payments of both the insured and the state. It is not possible to live on this pension alone in Switzerland. If you contribute to the "first pillar" for the maximum possible period (44 years for women, 45 years for men), the minimum pension payment can be 1,200 francs per month, which is very small for Switzerland.

The second "pillar" of the pension system consists of the payments of both the insured as an employee at work and the employer. This procedure is regulated by the "Occupational Insurance Act" ("Bundesgesetz über die berufliche Alters-, Hinterlassenen,- und Invalidenvorsorge"). Almost all employees pay contributions under this regime; the self-employed can do so voluntarily.

The third "pillar" of the Swiss pension system is voluntary. Investing in your pension under this "pillar" can be done on the basis of countless options offered to their clients by the country's leading banks. This is the very system of taking care of one's own pension.

In Switzerland, the voluntary insurance system is actively used, because - and this is very important to note - it implies significant tax benefits. These contributions are tax deductible, which makes such investments very profitable. Theoretically, using all three "pillars", one can earn a pension of 6,000 francs a month, which is already a good salary for an average managerial position.

The promised 64 years wait

But to become a happy pensioner in Switzerland, you need to work long and hard. The age of retirement in the country has been changed several times and is now 64 for women and 65 for men. For several years in a row, some political parties in Switzerland have been actively raising the issue of increasing the retirement age to 67.