Pensioners in Switzerland should anticipate reduced funds during their retirement years.
In a recent study, it was revealed that most of the individuals under scrutiny are likely to be Swiss or have grown up in Switzerland. The focus of the study was on individuals who have worked in Switzerland continuously for 44 years.
However, the report also highlighted a concerning trend for foreigners in Switzerland. Many foreigners will not have been working in the country for long enough to qualify for the full pension, resulting in lower pensions based on the amount they have paid in over the years. Foreigners who do not meet the 44-year requirement for full pension benefits will receive lower pensions based on their contributions.
Pension funds in Switzerland have been experiencing a massive cut in benefits. The decline in second pillar pension payments is primarily due to a reduction in the pension fund conversion rate and demographic and financial factors such as increased life expectancy and low interest rates. These factors lead pension funds to lower the guaranteed conversion rates to ensure sustainability and balance of their capital, resulting in smaller annual payments for retirees from the occupational pension system (second pillar).
The second pillar pensions, which are supposed to equal 60 percent of the final salary, have fallen short due to dwindling funds. The trend of falling pension payments also applies to the lower pensions of foreigners in Switzerland. According to the study, pension funds are now 40 percent lower than in 2002.
On a positive note, the first pillar (AHV/AVS) payouts have remained relatively constant and will increase slightly with the introduction of the 13th pension in 2026. Retirees in Switzerland, despite the declining second pillar pensions, remain the happiest in Europe.
Interestingly, foreigners who have moved to Switzerland to work are more likely to have 'blended careers' with some years working in Switzerland and some years working in other countries.
In a significant development, a September 2024 referendum saw over 67 percent of Swiss voters turn down the government's proposal to overhaul the second-pillar scheme. By 2025, a 55-year-old man with an annual income of 120,000 francs could expect a pension of only 62,860 francs, down from 74,920 francs in 2002.
For those seeking more information about their specific Swiss pension expectations, they are advised to contact their cantonal social security office. The VZ Retirement Barometer was released on August 8th, providing valuable insights into the current state of Swiss pensions.
Foreigners with 'blended careers' who have moved to Switzerland to work might face challenges in attaining the full pension due to the 44-year requirement, resulting in lower personal-finance prospects. Conversely, to effectively manage their personal-finance for retirement, foreign workers in Switzerland would be well-advised to consult their cantonal social security office and stay updated with reports like the VZ Retirement Barometer.
