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UBS Pension Forum – Pensions 2020: first steps down a long road

Zurich/Basel Media Switzerland


The Pensions 2020 reform would reduce the AHV financing shortfall by about a half, from 173.4% to 82% of GDP. Uncovered benefit obligations in the compulsory occupational pension system would decrease by 0%–30%. However, the restructuring costs would be shouldered unilaterally by the young and future generations.

Zurich/Basel, 19 January 2015 – "The Pensions 2020 reform would be a significant step in the right direction, as it would temporarily stabilize the funding of the first and second pillars," said Andreas Schlatter, Member of the Federal Occupational Benefit Plan Commission and Global Head of Distribution UBS Global Asset Management. The results of a new UBS report presented at the third UBS Pension Forum in Bern confirm this.

In the report, economists from the UBS Chief Investment Office Wealth Management and researchers from the University of Freiburg in Breisgau analyze the long-term prospects of the Swiss pension system with and without the reform. According to their calculations, the proposed reform would reduce the long-term AHV financing shortfall significantly, from 173.4% to 82% of gross domestic product (GDP).

The largest individual measures:

  • The maximum 1.5 percentage point VAT increase would have the greatest impact on financing: it would reduce the AHV financing shortfall by 72 percentage points in GDP terms. This measure would come primarily at the expense of the young and future generations.
  • The harmonization of the retirement age of men and women would reduce the funding shortfall by 15.1 GDP percentage points. 
  • The new focus of the widow's pension on childcare would contribute 10.2 GDP percentage points to the reduction in the shortfall. 
  • By contrast, the greater flexibility regarding retirement date, the simplification of financing flows between the Swiss government and the AHV, and the special regulations regarding early withdrawal of pension assets for people on low incomes would cost the AHV 9.6 percentage points of GDP in the long term.

According to the UBS report, the reform would also improve the sustainability of the second pillar. However, the proposed reduction in the minimum conversion rate for mandatory LPP/BVG savings, from 6.8% to 6.0%, would soon be eclipsed by the rise in life expectancy. The reform would lead to a decrease of 0%–30% in uncovered second-pillar benefit obligations.

However, the financial stability of the first and second pillars would be restored only temporarily and not completely by the Pensions 2020 reform. In order to guarantee the medium to long-term financing of the pension system, the reform would in future have to include additional measures. "True sustainability of the pension system can only be achieved when actuarial and demographic factors are incorporated into the system on a depoliticized basis – and this is not yet the case with the Pensions 2020 reform," said Veronica Weisser, economist and pensions expert at UBS. Additional measures, such as linking the retirement age to life expectancy, or temporarily suspending the adjustment of the AHV pension to salary and inflation trends would spread the costs of restructuring the system rather more evenly across generations.

Nevertheless, future generations will have to cope with a greater burden. "In the long term, the retirement age and taxes will have to be increased in Switzerland, too, so that the social systems can be funded," added Prof. Bernd Raffelhüschen, Head of the Intergenerational Compacts Research Center at the University of Freiburg and co-author of the report.

The full report is available on the Internet in German, French and Italian:




Dr. Veronica Weisser
Economist and pensions expert / Head CIO WM Swiss Macro and Sectors
UBS Chief Investment Office Wealth Management
Tel. +41 44 234 50 62

Dr. Daniel Kalt
Chief Economist Switzerland & Regional CIO Switzerland
UBS Chief Investment Office Wealth Management
Tel. +41 44 234 25 60

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