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Swiss pension system among 'world's best'

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Swiss pension system among 'world's best'
Photo: AFP
22:25 CEST+02:00
Switzerland has one of the best pension systems in the world but it lags behind those in Denmark and three other countries, according to an Australian study.

The Swiss rank fifth in the Melbourne Mercer Global Pension Index for 2014, released on Monday, which compares retirement schemes in 25 countries.

Denmark topped the study with a “first class and robust retirement income system that delivers good benefits, is sustainable and has a high level of integrity”.

Switzerland places behind Australia, the Netherlands and Finland in the ranking.

Like the three countries with a higher ranking, Switzerland has a pension system “that has a sound structure with many good features, but has some areas for improvement that differentiate it from an A-grade system”.

Denmark is the only country given an A grade, while Australia and the Netherlands get a B+, and Finland and Switzerland rate a B.

Sweden, Canada, Chile, the UK and Singapore rank behind Switzerland but also received a B grade in the report that assesses the “adequacy, sustainability and integrity” of retirement income programs in different countries.

The report says that Switzerland could improve its pension system through a number of measures , including by “increasing the state pension age over time”.

The Swiss statutory retirement age is 65 for men and 64 for women.

By comparison, Denmark has raised the retirement age to 67 from 65 for citizens born in 1955 or later, while it will be hiked further for those born after 1962.

Switzerland’s pension system consists of an earnings-related public pension with minimum benefits, a mandatory occupational pension scheme and voluntary plans offered by insurance companies and financial institutions.

The study says the Swiss system could also be improved by reducing “pre-retirement leakage by further limiting access ti funds before retirement”.

The minimum age for early retirement (through an occupational or second pillar pension) in Switzerland is 58.

It is also possible to withdraw a state (AHV) pension one or two years ahead of the official retirement date, although with a financial penalty.

The study says that other improvements could be made by:

- introducing a requirement that part of the retirement benefits must be taken as an income stream

- reversing the preferential tax treatment of lump sum payments in comparison to pension payments

- requiring plan trustees to develop a comprehensive risk management policy

For a look at the full report, click here.
 

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