Zurich, 25. June 2019 – The UBS Retirement Index Switzerland reached an all-time low at the end of last year. The index gauges the health of the Swiss pension system. “The negative dynamic underway for more than two years stems mostly from the rapid increase in pensioners versus the number of people working,” says Jackie Bauer, an economist and pension expert at UBS. This year's modest recovery may not last long as it relates primarily to the good financial market performance in the first quarter.

To address these issues, the Intergenerational Compacts Research Center at the University of Freiburg in Breisgau along with economists at UBS analyzed the long-term outlook for the Swiss pension system and government finances. There is a close relationship between pensions and public-sector finances – pension promises that cannot be financed through the pension system are an implicit liability of the state.

Less than two years of work per year of AHV benefits is not enough

Not only is the number of pensioners rising but people are living longer, so they are drawing their pensions for a longer period of time. Both of these trends are weighing on the AHV system. “People who reach retirement age in Switzerland today will have worked and made AHV contributions on average for only 1.8 years for every year that they receive an AHV pension. In 1948, when the AHV was established, it was 3.4 contribution years for every year an AHV pension was received,” explains Dr. Veronica Weisser, economist and pension expert at UBS. If a society wants to enjoy such a massive reduction of relative working time, it must also accept reduced prosperity, either via smaller pensions or a lower standard of living for the generations that are paying.

Making retirement more flexible and slowly increasing in the retirement age, so that the average period over which a pension is received makes up about 20% of a person’s life, would more than halve the AHV financing gap. Models implemented abroad that take into account the different life expectancy of different income and occupational groups are widely embraced by the populace and could serve as a model for Switzerland.

Other key results of the study are:

  • AHV funding shortfall: Pension promises from the AHV exceed its future income by about 170% of Swiss GDP (base year of 2016). This is equal to just over one trillion Swiss francs.
  • Reform and intergenerational fairness: The TRAF reform that was approved in a national referendum reduces the long-term AHV funding gap by about one-fifth. In combination with the AHV 21 proposal, it would even cut the shortfall in half. But the burden of both reforms for a person between the ages of 10 and 25 today is three times that of a 55-year-old, five times more than for a 65-year-old and about 15 times that of a 75-year-old. The plan to make the retirement age equal for women and men is the only measure in the reform package that increases intergenerational fairness. 
  • Sustainability gap: Implicit public-sector debt in Switzerland is 221.5% of GDP, well above the explicit public-sector debt of about 30%. A large portion of this stems not only from the AHV but from the costs for health and long-term care due to demographic changes.


New Zealand already fully implements the International Public Sector Accounting Standards (IPSAS) for government accounting, as recommended by the IMF and OECD. These standards address the shortcomings of simplified government accounting. Financing gaps are immediately apparent, long-term growth is supported and public-sector assets and liabilities can be actively managed. Countries impose regulations that require legal entities such as limited liability companies or cooperatives to have “proper accounting.” But most countries do not follow these regulations themselves. Yet their benefits in terms of improved transparency and making retirement financing more generationally fair are significant. “No country will be able to escape this trend,” says Dr. Philipp Weckherlin, an expert for good public governance.

UBS Switzerland AG

Further information

The full report is available in German and French. You can find out more:


Veronica Weisser

Head Macroeconomic and
Sector Analysis Switzerland
UBS Chief Investment Office GWM
Tel. +41 44 234 50 62

Jackie Bauer 

Economist and pensions expert
UBS Chief Investment Office GWM
Tel. +41 44 239 90 61