Here is a document which provides a summary of the pension systems in operation throughout the EU.
I can only speak from our experiences here in Switzerland, as we introduced corrections about 20 years ago to address this issue. And yes it was and still is very painful for many people. The objective of the change was to deliver a total pension of about 65% of a worker's final salary, but even after these changes we are still projecting a shortfall of up to 35%!
Today we operate the typical European 3 pillar system, and a quick summary would be:
- No none contributory pension
- A fully annual contributory state pension would cover about 2 months of living expenses (First Pillar), so there is no chance to live of it.
- Mandatory employer funded pensions (Second Pillar), with minimum contributions of 7% on both sides, so total of 14%.
- Personal savings, with tax relief up to about 6% of income under €106K
In the case of the 2nd pillar pension the following hold:
- Employees can buy in missing years provided they pay both the employee & employer contribution. Tax relief is available.
- The pension fund must provide a guaranteed rate of return as defined by law, shortfalls must be made good by the fund managers
- Most employers pay much higher contributions that the prescribed 7%, for older employees it is often as high as 20% for a total of 27% pa
- The pension fund investment strategy is defined by law and funds are strictly controlled with audit often carried out on a monthly or quarterly basis
In the case of the 3rd pillar savings the following hold:
- The investment strategy is regulated by law
- There are about 3 or 4 standard savings accounts available
- There is a guaranteed minimum return which must be provided
In the case of someone who has no or insufficient pension, they are considered a social case - their needs are assessed and funds are provided accordingly - there are not standard rates etc... if is very much on a case by case basis.
While it will have a positive impact in the future, the current situation has resulted in many less well off Swiss citizens having to move abroad when they reach retirement, which was most definitely not in their plan!
I can only speak from our experiences here in Switzerland, as we introduced corrections about 20 years ago to address this issue. And yes it was and still is very painful for many people. The objective of the change was to deliver a total pension of about 65% of a worker's final salary, but even after these changes we are still projecting a shortfall of up to 35%!
Today we operate the typical European 3 pillar system, and a quick summary would be:
- No none contributory pension
- A fully annual contributory state pension would cover about 2 months of living expenses (First Pillar), so there is no chance to live of it.
- Mandatory employer funded pensions (Second Pillar), with minimum contributions of 7% on both sides, so total of 14%.
- Personal savings, with tax relief up to about 6% of income under €106K
In the case of the 2nd pillar pension the following hold:
- Employees can buy in missing years provided they pay both the employee & employer contribution. Tax relief is available.
- The pension fund must provide a guaranteed rate of return as defined by law, shortfalls must be made good by the fund managers
- Most employers pay much higher contributions that the prescribed 7%, for older employees it is often as high as 20% for a total of 27% pa
- The pension fund investment strategy is defined by law and funds are strictly controlled with audit often carried out on a monthly or quarterly basis
In the case of the 3rd pillar savings the following hold:
- The investment strategy is regulated by law
- There are about 3 or 4 standard savings accounts available
- There is a guaranteed minimum return which must be provided
In the case of someone who has no or insufficient pension, they are considered a social case - their needs are assessed and funds are provided accordingly - there are not standard rates etc... if is very much on a case by case basis.
While it will have a positive impact in the future, the current situation has resulted in many less well off Swiss citizens having to move abroad when they reach retirement, which was most definitely not in their plan!