Very interesting. So I assume people contribute a large amount into pensions at an early age, to cover living costs at retirement?
Also how are pensions guaranteed as if you own a property you don't really care if it drops in price when you retire as you have somewhere to live but if your investment portfolio halfs it's a very different matter.
OK, here in Switzerland we have what the call the three pillar system:
- 1st pillar: is the state contributory pension
- 2nd pillar: is employment pension
- 3rd pillar: is personal savings
The usual objective is for the 1st and 2nd pillar to give you a pension of about 65% of your salary and are mandatory. The third pillar allows you to save about 6.5K pa tax free and should give you a lump sum of about 100K on retirement.
The 2nd pillar, employment pension, is usually paid in a rate of about 2:1 with the employer paying the larger portion and contributions range from about 7% to about 15% depending on age. When it comes to management of these funds there are a couple of things worth noting:
- Minimum asset allocations are mandated by law and are conservative
- Funds are required to return a certain percentage on average assets under management each year
- The management fee is only allowed if the return exceeds the required return plus the fee
- There are no entry, exit or transition fees
This does not mean that a fund can not suffer a capital loss, but it does keep them very low, many funds are down 15% in this recession.
The other thing is that the tax system encourages investing - there are not taxes on capital gains arising out of investment activities provided you do not trade more than that 10 times per month. And as a result most people will have a portfolio right down to the apprentice butcher!
As you said people move a lot more as they rent how does that affect communities. As in Ireland a lot of people live in the same area all there lives and as a result there would be a great sense of community. I would think it might be an issue when people get older and they would know very little people in there area in ch.
People do move a lot and the biggest change is when you leave home. But after that many changes are within the same area, the main focus is on utility - down sizing after the kids move out, moving closer to facilities such as doctors etc... as one gets older and so on. But sense of community here is very much based on membership rules rather than feeling. You are a member of a community once you join it and that brings with it certain responsibilities on both sides. For instance there is no such thing as a Swiss citizen in our terms - you are a citizen of a community and therefore Swiss. When you want to be come Swiss, you apply to your local community, who will decide if you get the nod or not. Assuming they accept you, this community then becomes responsible for you - should you ever become destitute! Of course you also pay most of your taxes to the community and most decisions are made at that level, so community is a big thing, but is rule based rather than evolving over time. Perhaps "casiopea" might comment on it too.
