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SWITZERLAND EXPLAINED

Why are Swiss people among the happiest in the world?

Even though the news has been mostly depressing in the past two years, Switzerland’s residents have found the proverbial silver lining amid dark clouds. This is what makes them happier than residents of most countries.

Why are Swiss people among the happiest in the world?
They may not look happy here but study says they are. Photo: Pixabay

For the 10th year in a row, Switzerland’s population ranks among the most content by the World Happiness Report, a publication of the UN Sustainable Development Solutions Network that draws on global survey data from people in about 150 countries.

In the just-released 2022 edition, Switzerland is ranked fourth globally, just below three Scandinavian nations: Finland (1), Denmark (2), and Iceland (3). Sweden and Norway are in the seventh and eighth place, respectively.

Switzerland’s neighbours, however, didn’t even make it to the top-10. Austria is in the 11th position, Germany in the 14th, France in the 20th, and Italy in the 28th.

Why is Switzerland rated so highly?

Clearly, happiness and well-being are subjective terms, inherent to each individual, and as such they can’t be measured scientifically.

“Our measurement of subjective well-being continues to rely on three main indicators: life evaluations, positive emotions, and negative emotions”, the report said. “Happiness rankings are based on life evaluations as the more stable measure of the quality of people’s lives”.

Researchers used seven categories to assess each country’s contentment level: Dystopia (evaluating how much better life is in a given country in comparison to ones with bad living conditions); perception of corruption in a country; generosity; freedom to make life choices; healthy life expectancy; social support; and GDP per capita.

Switzerland ranks especially well —  (better than higher-ranked Finland, Denmark and Iceland) in terms of its GDP, and also in regards to how respondents view their overall quality of life and living conditions when with compared with other nations.

The “social support” category is also highly rated by survey participants, as is healthy life expectancy and freedom to make choices.

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It fares less well, however, in the generosity category (as do most countries) and perception of corruption.

Switzerland is no stranger to high scores (both positive and negative) in various international rankings, ranging from quality of life and competitiveness, to cost of living.

You can find more about those topics here:

Switzerland named ‘world’s best destination for expats’

Zurich ranked world’s best city for ‘prosperity and social inclusion’

It’s official: Switzerland is the world’s ‘most competitive’ country

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COST OF LIVING

How to protect your savings against inflation in Switzerland

Switzerland is not insulated from the waves of inflation sweeping the world. Here’s how you can protect your savings.

A five franc coin is put into a shiny piggy bank
Inflation can erode your savings. Here's how to beat it in Switzerland. Photo: Pixabay

The world is being hit by waves of inflation, with countries across the globe seeing a rise in the inflation rate in recent months. 

Besides the impact of prices rising and things becoming more costly, the long-term impact of inflation is an erosion of the value of your savings. 

While the rate in Switzerland is less severe, inflation in October 2021 was the highest in three years. 

Here’s what you need to know about inflation in Switzerland – and how to protect your savings. 

What is the global situation? 

While the inflation rate in Switzerland is a concern, it is far better than in many other countries. 

Inflation is particularly high in the United States, where the country reached 6.2 percent from a year ago on November 10th, which is the biggest 12-month jump since 1990. 

In Europe, inflation rates cross the 2 percent mark in the summer of 2021. 

In neighbouring Germany, which shares Switzerland’s pathological fear of inflation, the rate is currently at 4.3 percent. 

What is the situation in Switzerland? 

Switzerland’s stable and robust economy has generally been resistant to inflation, particularly when compared with other wealthy countries. 

READ MORE: How can you save on your household energy bills in Switzerland?

That said, inflation is on the rise – and there are fears it could get worse. 

In summer, the Swiss State Secretariat for Economic Affairs warned that “a strong development in [consumer] demand could go hand in hand with capacity bottlenecks and have an inflationary effect.”

In October 2021, Switzerland’s inflation rate rose by 0.3 percent to 1.2 percent, notes the Federal Statistical Office. This is the highest figure since August 2018 and the equal highest monthly increase at any time over the past decade. 

Since the end of 2020, there has been a cumulative rise in inflation of 1.6 percent. 

The Swiss National Bank, which is tasked with ensuring price stability in Switzerland, seeks to ensure that inflation doesn’t rise about two percent per year. 

A major consequence of higher inflation elsewhere is that the value of the franc rises. 

In fact, the Swiss National Bank said in November that the rising value of the franc, rather than inflation, was at present the primary concern. 

While a strong franc may be beneficial in terms of purchasing power from abroad, it can harm Swiss exports by making them more expensive to buy from abroad. 

Why is inflation on the rise? 

As with pretty much everything over the past two years, the pandemic is at least partially to blame. 

Government spending as a consequence of the pandemic is a major factor underpinning inflationary trends, Matthias Geissbühler, economist and investment manager at Raiffeisen Switzerland, told Swiss news outlet SRF. 

The shutdown of economic activity last year led to an effective freeze in prices, or in some cases a retreat. Now, as economic activity reboots, prices are beginning to catch up. 

The European Central Bank (ECB) states that the current high inflation is a temporary effect of the pandemic. 

Lockdowns caused bottlenecks in global supply chains, leading to an imbalance in supply and demand. 

Countries have also been forced to borrow large amounts of money, with debt giving rise to larger inflation rates. 

While the worldwide vaccination campaign has allowed a reopening of the economy, concerns around variants has meant that uncertainty is still prevalent in Switzerland. 

Christian Gattiker, the chief strategist at Bank Julius Baer, said uncertainty made it difficult to determine the extent of the current situation. 

“We have never had such inaccurate and uncertain data in the last 30 years. It is probably a historically unprecedented situation,” he told SRF. 

What does this mean for Switzerland? 

Fortunately for Swiss residents, inflation is comparatively minimal, with economists predicting it is unlikely to rise above the dreaded 2 percent mark anytime soon. 

Economist Thomas Jordan told the NZZ the franc remains a safe haven currency and as long as it remains strong, imports will remain cheap – which removes pressure on inflation. 

As Switzerland relies on imports much more than many countries, including the United States and Germany, lower costs of imports has a cooling effect on inflation. 

Geissbühler says Switzerland remains “in an absolutely comfortable position” when it comes to inflation. 

That said, with the ongoing impact of the pandemic uncertain, there are some tried and tested measures to avoid the negative impacts of inflation. 

Savings accounts

Switzerland’s aversion to debt is not only seen at a governmental level, with the average Swiss reluctant to spend more than they earn. 

Historically, the Swiss have been willing to stash their cash in the nation’s famous banks. 

EXPLAINED: Which banks are best for foreigners in Switzerland?

However, inflationary fears and other financial trends have meant that few Swiss banks pay out any meaningful interest on savings. 

In effect, this means that your money continues to lose value, as the inflation rate is higher than the interest rate.

While as we illustrated above this is less severe in Switzerland than abroad, putting your money somewhere where it loses value does not make much sense from an investment perspective. 

Gold

One alternative option for investing your savings is buying gold. In times of financial uncertainty, the value of gold can rise.

A study by the Goethe University in Frankfurt concluded that gold historically offers the best value as an investment during times of inflation. Generally, investors tend to park their money in the precious metal due to the fact that it can’t be replicated, unlike money.

But investing in gold comes with ancillary costs such as storage.

Experts also warn that the price of gold is volatile. Last year it rose to a record high of over 2,000 dollars per ounce before dropping down to less than 1,800 dollars today.

“Gold is volatile – prices fluctuate over the long term in much the same way as those of stocks,” Andreas Hackethal, Professor of Finance at Goethe University Frankfurt, told the Süddeutsche Zeitung.

Securities and stockmarket

Switzerland’s reputation for stability means it is a good place to invest. 

Stable investments mean you should see a strong, reliable return, although if you want volatility there are plenty of risks to be aware of. 

Fortunately, technology has made it easier, with a number of apps you can use to make and monitor your investments. 

The best option for regular investors – i.e. people for whom investment is not their main source of income – are investment funds. 

These are managed funds which pools together money from other investors. There is little day-to-day work required from the investor, with major investment decisions made by expert fund managers. 

Another option can be to go it alone and invest in stocks, which can be higher risk and will involve more work researching, but could be a greater payoff. 

Large and reputable Swiss businesses are often a target for investment, including the banking and insurance sector (Credit Suisse, UBS and Zurich), along with Roche, Nestle and Glencore. 

Real estate

Another investment possibility which will not see your money eroded by inflation is property. 

While Swiss generally prefer to rent rather than own a home for a variety of reasons – Switzerland’s the only country in Europe with a home ownership rate lower than 50 percent – property investment is still a smart strategy. 

READ MORE: Why do so many Swiss prefer to rent rather than buy their own home?

During the first nine months of this year, house prices rose by 6.2 percent, while apartments went up by 5.2 percent, according to RealAdvisor appraisal platform. 

Swiss finance site Comparis notes that costs of apartments rose by up to 97 percent in Zurich from 2007 to 2018, with increases over 75 percent in several other regions. 

However, according to analysis from August 2021 by Swiss financial services firm UBS, property prices in several parts of the country are at risk of overheating. 

The UBS Real Estate Bubble Index said parts of Basel, Lausanne, Luzern, Nidwalden, Ticino, Vaud, Zug and Zurich all were exposed to some additional risk of overheating. 

READ MORE: Can foreigners buy property in Switzerland?

Pensions

While plenty of us would like to pull off a variety of shrewd investments that meant we could quit our job tomorrow and live on a yacht, but when we’re thinking about savings and investments, the focus is generally on having a comfortable retirement. 

One option in that regard is to invest in your own pension fund. 

The more you contribute to your Swiss pension fund, the more you will receive in retirement. 

There are three pillars to the Swiss pension system: old age, occupational and private. The one which works for you will depend on your financial circumstances. 

Check out the following for more information. 

EXPLAINED: How does the Swiss pension system work – and how much will I receive?

What about Bitcoin? 

One further option is to invest money into cryptocurrencies such as Bitcoin, which is not subject to the same inflationary pressure as national currencies. 

However, while cryptocurrencies avoid inflationary pressures in the same manner as national currencies such as the Swiss franc, Switzerland’s Tagblatt notes that they “do suffer from fear of inflation from time to time and they are generally very volatile”. 

As people generally do not use cryptocurrencies for daily purchases, an inflationary increase may not be felt on a day-to-day basis, but the devaluation of the currency – which is effectively what inflation is – will obviously devalue your investment. 

The volatility of cryptocurrencies might also strike fears into the hearts of investors seeking stability, but may appeal to investors who feel the potential payoffs are worth the risk. 

Please keep in mind that this report is intended as a guide only and should not take the place of qualified advice from a financial adviser. Got a question or think of something we should focus on? Get in touch at [email protected] 

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