Last update: 17.09.2024 08:34
The Federal Statistical Office (FSO) published the new pension fund statistics in December 2018 . published. This contains a wealth of statistical information on the state of occupational pensions in Switzerland. How do you think the average pension fund pension has developed in recent years?
Which statement about the pension fund pension is actually relevant for you? Basically, only one statement is important for you. This is the information on the expected pension amount that your pension fund will give you on your pension fund statement at the normal retirement age. However, this statement is not an assurance, but a forecast of how high your pension fund pension could be if the world develops as your pension fund assumes. It therefore helps if you get an overview of the current development and forecasts for pension fund pensions. Then you will know what is happening and can take action to improve your own situation.
Let’s take a look at the development of three key figures. First, we look at the current average pension fund pension in nominal terms, i.e. without taking inflation into account. Secondly, we look at the current average pension fund pension in real terms, i.e. adjusted for inflation. And thirdly, we take a look at the average new pension fund pensions.
1. how does the annual nominal average pension fund pension develop?
Everything in the green with pension fund pensions? Well, the pension trend looks stable. This is because the current average pension fund pension per year does not appear to be changing significantly. This parameter describes how much pension is currently paid out per pensioner on average across all pension funds. The statistical figures from the FSO say the following: the average pension fund pension in 2017 is around CHF 35,650 per year for men (approx. CHF 3,000 per month) and CHF 18,400 per year for women (approx. CHF 1,500 per month). So far so good. Or is it?
Average annual pensions for men / women 2013-2017
2. how does the annual inflation-adjusted average pension fund pension develop?
The Swiss Federation of Trade Unions (SGB) has taken a closer look at the FSO data. In particular, the SGB has adjusted the data for inflation, i.e. calculated the real purchasing power of pension fund pensions. And here a somewhat different picture emerges. Since 2005, the inflation-adjusted average pension fund pension has fallen by almost 9 percent.
Inflation-adjusted average pension fund pension (December 2015 = 100)
There are various reasons for the decline in the current average pension fund pension. Firstly, pensions in occupational pension schemes depend on how much return the pension funds can achieve on the financial markets. Since, according to the comprehensive Swisscanto Pension Fund Study2018, around 30% of pension fund assets are invested in domestic and foreign bonds, the historically low interest rates mean that much lower returns are being generated than in the past. As a result, the income credits on individual pension assets are falling. As a result, the pension assets of insured persons are growing more slowly and are smaller than before for new pensioners with the same salary.
On the other hand, increased life expectancy means that pension assets must last longer for a pensioner. For this reason, practically all pension funds have significantly reduced the conversion rates used to convert pension assets into an annual pension fund pension in recent years. A lower conversion rate leads to a lower annual pension fund pension. A lower conversion rate multiplied by smaller pension fund assets results in a smaller pension fund pension.
Average conversion rates pension funds 2005-2019
The average regulatory contribution rates have also risen over the same period and are currently slightly above 19%. This means that more of your salary has to be set aside to build up pension assets.
Average regulatory pension fund contribution rate 2005-2019
3. how are the average AHV and BVG new pensions developing?
In addition to the average amount of current pensions, it is also very interesting to see how high the pensions for new pensioners are. This information is provided by the FSO’s new pension statistics. The most recent data comes from 2016. These statistics show, among other things, how many people receive a new old-age pension from the AHV, occupational pension scheme or 3rd pillar benefits in a given year and how high these pension benefits are.
New pensions Pillar 1 / 2nd pillar 2016 for men and women
On average, AHV old-age pensions are almost 25% below the maximum monthly AHV pension of CHF 2,370
The new pension statistics show that the average AHV old-age pension in 2016 was CHF 1,809 per month or around CHF 21,200 per year. As the median is only slightly higher, this means that most insured persons do not receive a maximum AHV pension. This is likely to surprise many insured persons. However, at second glance, one of the corresponding reasons applies to many, such as years of absence, part-time work or a total AHV income that is too low over the contribution period. In the 2nd pillar, the average BVG new pension in 2016 was CHF 2,358 per month or around CHF 28,300 per year.
Average is just average, so it’s worth taking a look at the differences between the sexes. That’s why we take a look at the pensions for men and women in the AHV and BVG:
- In 2016, men received an average old-age pension of CHF 23,400 per year (CHF 1,950 per month) and women CHF 21,000 per year (CHF 1,750 per month).
- Under Pillar 2, men received an average old-age pension of around CHF 26,600 per year (CHF 2,220 per month) and women around CHF 15,300 per year (CHF 1,280 per month) in 2016.
It is noticeable that women receive significantly lower pensions. For women, the AHV old-age pension is almost 200 francs lower per month and their BVG new pension is around 1,000 francs lower than that of men.
On average, new BVG pensions are substantially lower than the current average pension fund pensions
A comparison of the BVG new pensions with the current average pension fund pensions shows that the new pensions are significantly lower than the current average pension fund pensions:
For men, the BVG new pension is around 26% lower than the pensions in the current pension portfolio. While the average current pension fund pension in 2017 was just under CHF 3,000 per month, it was only CHF 2,200 per month for new pensioners in 2016.
For women, the BVG new pension is around 16% lower than the current pension. While the average current pension fund pension in 2017 was approx. CHF 1,500 per month in 2017, it was just under CHF 1,300 per month for new female pensioners in 2016.
What is the benefit target or replacement rate for AHV and BVG?
According to the Federal Constitution (Art. 113 para. 2), the pension insurance system should provide insured persons with sufficient security to enable them to “continue their accustomed standard of living” in old age or in the event of disability. To this end, the AHV/IV form the first or state pillar in the three-pillar system, which is intended to secure the basic necessities of life. It is supplemented by occupational pension provision, which is intended to enable the continuation of the accustomed lifestyle.
The benefit objective of the AHV and BVG is therefore to enable AHV and BVG insured persons to continue their accustomed standard of living.
AHV and BVG replacement rate in % of the annual salary (as at 2019)
People with higher incomes should make private provisions
The Federal Council considers this to be the case if the pensions from AHV and BVG together account for 60 percent of the last AHV salary. This parameter is also referred to as the replacement rate. The replacement rate shows how high an insurance benefit is in relation to the last salary. Benefit target of the 1st and As already mentioned, the 2nd pillar is a replacement rate of 60 percent for an income of CHF 85,320. As at 2019, this income corresponds to the BVG upper limit. For this income, the BVG replacement rate is 34% and the AHV replacement rate is 26%, i.e. 60% in total.
For income in excess of this, the replacement rate from AHV and BVG mandatory benefits falls below 60%, the more the income exceeds the BVG upper limit. This is why extra-mandatory benefits from the pension fund are important. And finally, in the three-pillar system, private pension provision in the third pillar should cover individual needs in old age.
Summary
Average pension fund pensions have fallen in recent years: adjusted for purchasing power, average pension fund pensions have fallen by 9% and new BVG pensions are lower than current pensions. For men, these are around CHF 10,000 lower per year; for women, the average annual BVG new pension is around CHF 3,000 lower than the average current pension fund pensions. These effects are particularly significant for incomes above CHF 85,320 (BVG upper limit). The socio-political benefit target of a 60% replacement rate ends at this threshold. From today’s perspective, there is no realistic reason why this should change.
You yourself are responsible for your future pension income. That’s why you should get an overview of your situation and your options now. You can do this in three steps:
- Calculate your future pension (free of charge)
- Add the annual statement from your pension fund and complete the pension check with your individual pension fund data. This will give you your own personal analysis.
- Read the eBook on pension provision and find out how you can improve your pension situation yourself.
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