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Pensions: how does the Swiss model work?

As the standoff continues in France between the government and the unions on the pension reform, RFI went to see how it was going on in Switzerland. If the pension system is very different there, it is just as difficult to reform. Deciphering of our correspondent in Geneva.

The pension system is one of the pride of Switzerland. Some even see it as one of the best systems in the world. How does it work exactly?

This is known in Switzerland as the "three pillar" system. Its origins date back to the end of World War II, but it only took its current form in the 1970s.

What are the three pillars? The first pillar is AVS, Old Age and Survivor Insurance. It is the equivalent of French pay-as-you-go retirement. A public retreat, managed by the federal state. Everyone contributes, everyone benefits. In Switzerland, you can reach your first pillar at 65 if you are a man, 64 if you are a woman.

The second pillar is occupational pension. We are there in a funded system. All workers are obliged to contribute to the second pillar from a certain income. Employers also contribute. It is by far the most important pillar for many Swiss people.

Finally, the last pillar is completely optional. You save if you want to, and if you can. It's actually the equivalent of life insurance.

How is this system funded?

This is where Switzerland joins France a bit. Like many European countries, Switzerland is facing an aging population. In 1948, when AVS, the first pillar, was created, there were six working people for every retiree. Today, we are more like three and a half against one. And the ratio should even drop to two workers for a retiree by the middle of the century. It is therefore difficult to ensure public pensions for Swiss pensioners under these conditions.

The government estimates that from this year the AVS accounts will no longer be balanced. The deficit could reach more than eight billion Swiss francs in 2030, or 7.44 billion euros. As for the second pillar, its funding is based on the performance of the provident funds. However, they have to face the decline in financial market returns. Hence the idea of ​​reforming a system that has not changed for 20 years. This is what the government wanted to do two years ago by aligning the retirement age for women with that for men, lowering the level of supplementary pensions and increasing the VAT to finance them. Reform rejected by the Swiss in the ballot box. We have been there ever since.

Especially since this system does not prevent poor retirees.

We often forget it, but poverty also exists in Switzerland. It affects just over 7% of the population. A rate that almost doubles among seniors. It is much more than elsewhere in Europe.

One of the explanations is that in Switzerland, you can draw on your second pillar, your retirement, almost anytime. For example to buy housing. And if you find yourself at 65 with your only first public pillar, it's sometimes very complicated to make ends meet. Poor retirees may receive additional benefits in this case, but sometimes this is not enough.

This is the limit of the three pillar system. A hybrid system, but one which relies much more on its capitalization component and on individual responsibility. This requires saving, a lot and very early. What younger generations do less, says Anne Sylvie Dupont, a professor of public law at the University of Geneva, specializing in social security issues. And it can also be seen in opinion surveys: a little fatalistic, three quarters of the Swiss say they expect a reduction in their pensions.

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