Description: Annuities in Switzerland

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Annuities in Switzerland

Switzerland's pension system has attracted considerable attention, mainly due to its reliance on a three-pillar structure. A relatively small pay-as-you-go system (first pillar) is complemented by a mandatory, employer-based, fully funded occu...

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Bibliographic Details
Main Authors:	Bütler, Monika, Ruesch, Martin
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	ACCOUNTING ADDITIONAL CONTRIBUTIONS ADDITIONAL INCOME ADDITIONAL PAYMENTS ADDITIONAL PENSION ADMINISTRATIVE COSTS ALTERNATIVE INVESTMENTS AMOUNT OF MONEY ANNUAL WAGE ASSET ALLOCATION ASSET MANAGEMENT AVERAGE CONTRIBUTION AVERAGE PENSION AVERAGE PENSIONS AVERAGE WAGE AVERAGE WAGES BANK PRODUCTS BANKS BENEFICIARIES BENEFIT PLAN BENEFIT PLANS BEQUEST BOND BONDS BUSINESS CYCLE CALCULATION CALCULATIONS CAPITAL MARKET CAPITAL REQUIREMENTS CAPITAL STOCK CASH FLOWS CHILD CARE CLAIMANT CONSOLIDATION PROCESS CONTRIBUTION CONTRIBUTION RATE CONTRIBUTION RATES CONTRIBUTION SCHEMES CONTRIBUTIONS CREDIT BALANCE CREDIT BALANCES CREDITS CURRENT PRICES CURRENT RATE DEFINED CONTRIBUTION PENSION DEGREE OF RISK DEGREES OF RISK DEPENDANTS DIFFERENT INTEREST RATE DIFFERENT INTEREST RATES DISABILITIES DISABILITY DISABILITY BENEFITS DISABILITY INSURANCE DISABILITY PENSION DISABILITY PENSIONS DISCOUNT RATE DISCOUNT RATES DIVORCE EARLY RETIREMENT EARNINGS EXPENDITURES FAIR VALUATION FEMALE WORKERS FINANCIAL ASSETS FINANCIAL CONSTRAINTS FINANCIAL DIFFICULTIES FINANCIAL HEALTH FINANCIAL MARKETS FINANCIAL POLICY FINANCIAL SITUATION FINANCIAL SYSTEMS FIXED INCOME FIXED INCOME INVESTMENTS FREE ASSETS FUND MANAGERS GOVERNMENT BOND GOVERNMENT REVENUES GROSS INCOME GUARANTEE FUND HEALTH INSURANCE INCOME INCOME GROUPS INCOME INCREASE INCOME LEVELS INCOME SOURCE INCOME STREAM INDIVIDUAL PENSION INDIVIDUAL RETIREMENT INFLATION INSURANCE COMPANY INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL STANDARDS INVESTMENT OPPORTUNITIES INVESTMENT PORTFOLIO INVESTMENT REGULATIONS LABOR FORCE LABOR MARKET LIABILITY LIABILITY MANAGEMENT LIFE EXPECTANCY LIFE INSURANCE LIFE INSURANCE COMPANIES LIFETIME LIVING COSTS LIVING STANDARD LONG-TERM PROJECTIONS LOW COST LOW INCOME LOW-INCOME LOW-INCOME WORKERS LOWER INTEREST RATE LOWINCOME LUMP SUM LUMP SUMS MARGINAL UTILITY OF CONSUMPTION MARKET CONDITIONS MARKET DEVELOPMENTS MARKET INTEREST RATES MARKET RETURNS MARKET RISKS MARKETING MARRIED COUPLE MARRIED COUPLES MARRIED WOMEN MATURITY MAXIMUM CONTRIBUTION MAXIMUM CONTRIBUTION RATES MINIMUM BENEFIT MINIMUM BENEFITS MINIMUM CONTRIBUTION MINIMUM PENSION MINIMUM RATE OF RETURN MONTHLY INCOME MONTHLY INCOMES MORTGAGE MORTGAGE PAYMENTS NOMINAL YIELD OCCUPATIONAL PENSION OCCUPATIONAL PENSION SCHEME OCCUPATIONAL PENSION SCHEMES OCCUPATIONAL PENSIONS OCCUPATIONAL PLANS OLD-AGE PENSION OLDER WORKERS PENSION PENSION BENEFIT PENSION BENEFITS PENSION COMPANIES PENSION FUND PENSION FUNDS PENSION PLAN PENSION PLANS PENSION PROVIDER PENSION PROVIDERS PENSION REFORMS PENSION SYSTEM PENSION SYSTEMS PENSIONERS PENSIONS POVERTY RATE PRESENT VALUE PRIVATE PENSION PUBLIC PENSION PUBLIC PENSION SCHEME REAL ESTATE RECESSION REFERENDUM REGULATORY AUTHORITIES REGULATORY FRAMEWORK REPLACEMENT RATE REPLACEMENT RATES RESERVES RESPONSIBILITIES RETIRED RETIRED INDIVIDUAL RETIRED INDIVIDUALS RETIREMENT RETIREMENT AGE RETIREMENT AGES RETIREMENT ASSETS RETIREMENT BENEFITS RETIREMENT DECISION RETIREMENT DECISIONS RETIREMENT INCOME RETIREMENT INCOMES RETIREMENT PLANS RETIREMENT PRODUCTS RETIREMENT PROGRAMS RETIREMENT SAVINGS RETURNS RISK MANAGEMENT RISK MANAGEMENT STRATEGIES RISK PREMIUM SAFETY NET SALARY SAVINGS SAVINGS INSTRUMENTS SMALL EMPLOYERS SOCIAL INSURANCE SOCIAL INSURANCES SOCIAL SECURITY SOCIAL SECURITY CONTRIBUTIONS SUPERVISION OF PENSION FUNDS TAKE-UP RATE TAKE-UP RATES TAX TAX ADVANTAGE TAX RATE TAX TREATMENT TRANSPARENCY TRUST FUND TRUSTFUND UNEMPLOYMENT VALUATION VALUE OF PENSION WAGE GROWTH WAGES WITHDRAWAL WORK FORCE WORTH YIELD CURVES YOUNGER WORKERS ZERO COUPON
Online Access:	http://documents.worldbank.org/curated/en/2007/12/8877327/annuities-switzerland http://hdl.handle.net/10986/7567

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Summary:	Switzerland's pension system has attracted considerable attention, mainly due to its reliance on a three-pillar structure. A relatively small pay-as-you-go system (first pillar) is complemented by a mandatory, employer-based, fully funded occupational pension scheme (second pillar). The main goal of this paper is to provide a detailed description and analysis of the Swiss pension system. Particular emphasis is placed on the second pillar and its role in the provision of old age benefits within the Swiss social security system. The paper shows, for example, that a typical individual with an uninterrupted career can expect a net (after-tax) replacement rate of at least 70 percent. Occupational pension plans are highly regulated. Minimum interest rate requirements and minimum conversion rates (at which the accumulated retirement balances are transformed into annuity streams) introduce many elements of defined benefit plans into notionally defined contribution schemes. The resulting money's worth ratios are very high (with the exception of single males). Switzerland also has a high annuitization rate by international standards (approximately 80 percent). However, due to high fragmentation of the scheme and non-uniform accounting practices, some aspects of the system are not very transparent. The paper sheds light on the financial health of the pension system and the evolution of the regulatory framework in the past two decades.