Switzerland: High Replacement Rates and Generous Subsistence as a Barrier to Work in Old Age

Monika Bütler ()

The Geneva Papers on Risk and Insurance - Issues and Practice, 2009, vol. 34, issue 4, 577 pages

Abstract: During the last decade the traditionally high participation rate of elderly workers in Switzerland has remained constant for men and has increased substantially for women. Low social security implicit tax rates epitomize positive work incentives for mid- and high-income individuals, while at the same time generous means-tested social assistance make working longer than the earliest retirement age unattractive for low-income earners. A more subtle reason to retire early is the pure income effect brought about by high retirement benefits for all income groups. These high benefits together with demographic ageing are also the main reason for the unfavourable financial prospects for both the PAYG first pillar and funded occupational pension plans. Interestingly, the financial crisis has not only reduced the value of assets in the funded components of the scheme, but also uncovered structural deficiencies of the second pillar with respect to the funding ratio, regulation and supervision.

Date: 2009
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