An ageing population: the pension system is under pressure
We are currently seeing two social developments unfold that are relevant to our pension system:
- the life expectancy of the Swiss population is increasing, which is why OASI and pension funds have to pay out for longer.
- Over the course of the next few years, more people than average will be retiring.
These points are critical if we examine the pay-as-you-go system under the first pillar more carefully. The state pension financing process involves direct contributions from those in gainful employment whilst those in retirement receive payment. So if the proportions of these two population groups change, the system is in trouble. If you have a large number of people in gainful employment financing the pensions of a small number of pensioners through OASI contributions, the system is secure. However, the population shift we are seeing has changed things: when OASI was introduced, you had 6.6 people in gainful employment financing every pensioner, whereas now, this figure has fallen to 3.4.
OASI is currently seeing a funding shortage and only covers 80% of pensions, with the other 20% being covered by the Confederation’s OASI fund. As the state pension system comes under increasing pressure, private pensions are becoming more and more important.