A new study from wealth centre WZ has revealed that pensions in Switzerland are dramatically less valuable now than they were at the beginning of the century. As the country prepares to vote on reforming pensions at the latest round of Swiss federal referendums in September, the report found that in real terms, second-pillar plans have lost over a third of their value since 2002.

Swiss pensions are dramatically less valuable in real terms

According to the data, in 2024 the pensions 55-years-olds can expect to receive when they retire are a fifth less valuable than they were back in 2002. This means that in real terms, first and second-pillar pensions are 15.000 francs a year less valuable than they were at the beginning of the 21st century.

Pension values across the pillars have evolved in different ways. As they are continually adjusted to account for inflation, first pillar (AHV / OASI) pensions have seen their real value increase by 19 percent on average between 2002 and 2024. This is likely to be boosted following the implementation of the 13th month of AHV pension, which was approved by voters in March 2024.

By contrast, as they are tied to salaries rather than inflation, second-pillar pension plans (BVG) have seen their real value drop by a whopping 39 percent between 2002 and 2024. This means that today, both AHV and BVG account for around 50 percent of pension payments. Back in 2002, BVG accounted for 66 percent.

Workers in Switzerland receive less pension when compared to final salary

The last decades have also seen a de-coupling of last salaries and how much retirees receive in pension. Back in 2002, it was assumed that someone with an annual last salary of 100.000 francs a year would receive around 62 percent of that annual income as a pension, with both the government and providers setting a soft target of 60 percent.

Today, the value is just 52 percent, with the report adding that “anyone who earns 150.000 francs a year must expect a pension that is only around 43 percent of their last salary. In 2002, it was around 58 percent."

Switzerland set to vote on pension reform in September

The findings come as Switzerland grapples with concerns about how to fund the pension system into the future, with WZ noting that a majority of residents surveyed said it was a concern. A desire to secure the system into the future led the government to propose a series of reforms to the BVG, which will cut payments for most pensioners.

The government has argued that second-pillar pensions are “no longer adequately financed”, and that lower-income earners will receive a better pension under the reforms. In response, the Swiss Federation of Trade Unions estimated that the change could cut some pensions by 3.200 francs a year.

Despite this backdrop, WZ noted that when surveyed, residents of Switzerland feel more financially secure now than they did a year ago - a phenomenon they attributed to a better stock market and the Swiss National Bank lowering interest rates, easing the burden on those with mortgages. Thanks to the passing of the 13th month of AHV, trust in pension funds has also improved.

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