The Swiss pension system is very efficient
Swiss retirees are doing well: 73% of people aged 65 and over live in a household with high or very high financial satisfaction. And two-thirds say they can afford at least as much as before retirement.
Old-age provision in Switzerland is based on the AHV (first pillar), occupational pension provision (second pillar) and private retirement savings in the third pillar. The constitutional mandate for the three-pillar system is to secure subsistence and the previous standard of living. But to what extent are these goals achieved in reality? Life insurer Swiss Life investigated this question in a study.
More retirees are saving than using up their assets
Upon retirement, the AHV pension becomes the most important source of income in most households, followed by second-pillar pensions. Second-pillar benefits have gained in importance over the past decade: While in 2012 only 66% of retirees up to age 69 or 70 received funds from occupational pensions, by 2019 this figure had risen to 76%. Half of retired taxpayers have assets of more than around CHF 300,000 in addition to their pension income, and these are often tied to real estate. But retirees do not consume these assets on average, even though the savings rate drops significantly in retirement. "Only about one-fifth of people 65 and older live in households that deplete their assets. Slightly less than half spend as much money as comes in, and about a third continue to put money aside," study author Andreas Christen notes.
More spending on health, less on mobility and restaurants
Gross incomes generally decline with retirement. Between 2015 and 2017, for example, couple households and single people aged 65 to 74 had on average around one-third less income than those aged 50 to 61. However, the drop in income associated with retirement is compensated for to a greater extent by a lower savings rate and lower contributions for social security and taxes. For the other budget items, 65- to 74-year-old couples and singles spend just under a tenth less than 50- to 61-year-olds. However, the structure of spending differs considerably: health care spending, including health insurance premiums, is on average a quarter to a third higher in early retirement. Consumer spending that typically occurs away from home, such as restaurant visits or for mobility, is around one-fifth lower overall in the 65 to 74 age group than among 50 to 61-year-olds.
Most can afford the same as before retirement
Two-thirds of 65- to 75-year-olds from German- and French-speaking Switzerland surveyed by Swiss Life say they can afford at least as much today as they could before retirement. The other third cut back most in the areas of travel (75%), restaurant visits (66%) and clothing (62%). If retirees had 500 francs more available per month, they would most often use these funds for travel (50%), saving (29%), giving gifts (26%), restaurant visits (19%) or culture/hobbies (18%).
Financial satisfaction is higher at retirement age than before
73% of people aged 65 and over live in a household with a high level of financial satisfaction. For those under 65, this figure is only 58%. A full 80% of the over-65s surveyed by Swiss Life feel financially self-determined - more than in any other age group. Retirees in Switzerland also fare well in a Western European comparison: Only in Denmark, Norway and Sweden are people aged 65 and over more financially satisfied than in Switzerland. In contrast, 19% of people in Switzerland aged 65 and over live in a household that they consider to be struggling to make ends meet - although this figure is higher among those under 65, at 28%. Compared with other population groups of retirement age, foreign retirees in particular, as well as those living alone, divorced retirees and those with compulsory education live in a household with lower financial satisfaction.