Until the end of June 2020, Donald Desax was Head Occupational Benefits at Helvetia. Shortly before he retired, a study appeared entitled «How expensive is life if it is always the weekend?», the results of which reflect people’s ideas of life in retirement. In the interview with Donald Desax, we take a look at the study results and his transition to the «third age».
When I was 30 years old, my idea was to retire at the age of 55 and do something completely different – whether it be writing a book, running my own farm or taking extended trips. Quite honestly, I was not yet thinking about the financial consequences at that time. Nevertheless, I did start building up a third pillar at a young age.
When I was fifty, I made financial arrangements to ensure that early retirement was indeed possible. Over the last few years, my main concerns have been to prepare for a seamless handover to my successor, think about how I wish to hand over the organization and how I can prepare my employees for it. For me, giving prompt consideration to retirement from working life is a necessary part of management and active leadership.
I smile as I say that my focus at the age of 30 was also on the age of 55. I think it is great when young people have dreams for their old age. These future dreams are an important engine and source of energy for the present. At the same time, I understand that issues around retirement provision are still a long way off. At the age of thirty, you are definitely occupied with other things such as work or family.
What I would like to see, though, is young people in particular becoming aware that the three pillars of retirement provision are not automatically assured. In the first and second pillar, there will undoubtedly have to be reforms. Either we are prepared to work longer, we pay higher contributions or we have to accept cuts in benefits. Any pension gaps should be made good by making personal provision in the third pillar, which is why I advise starting to build up the third pillar early on. And at the age of 50 at the latest, you need to look at how exactly your life in retirement will be financed, and spot and close any gaps, because at the age of 60, it is definitely too late to do so.
Demographic change is evident on three levels:
This increasingly dramatic imbalance will result in OASI and the second pillar being in urgent need of restructuring. I think that the retirement age will have to be increased in future, even if that is not currently acceptable to the majority of the population. I can well imagine that flexible models will continue to develop. Perhaps it will be possible to work until the age of 70, but on a part-time basis from 60 onwards, for example.
I have always pointed out to my children, too, that retirement provision is in crisis and is not sustainably funded. I have encouraged them to actively exercise their rights as young people in referendums and place pressure on politicians to interpret the intergenerational contract from a young person’s perspective as well. I do not hold with the view expressed by some young people that they will get no more out of the pension system in their old age. That would be a fatalistic view of things that made any reform seem unnecessary because it would be ineffective. No, in 35 years, there will still be pension benefits from the three pillars, but we need to take action now to ensure that the pension system is sustainably funded and safeguard its long-term future. To this end, legislators should undertake a radical purge and simplification drive in the second pillar in particular, and pension funds should be allowed greater freedom and simplicity in their operations again. Technical and economic inputs such as the conversion rate or the LOB rate of return do not belong in a law or regulation; rather, the foundation board should be able to set them. And the political polarization and management that is a feature of the systematic crisis in retirement provision should quickly give way to pragmatic solutions. Politicians must put party allegiances aside and, as a matter of urgency, offer cross-party solutions. There are ways, but the courage to undertake systematic reform is (still) lacking.
By nature, the three pillars and the interaction between them are complex, as there was a conscious decision in favour of a mixture of a pay-as-you-go and a funded system, which by itself is difficult to understand. Financial assumptions have to be made over a number of decades and demographic components also come into play, in particular future population trends. Economic trends, investment options and the long-term returns on those investments are also important. These are highly complex issues that the system has to resolve. There can be no simple solutions here.
That is absolutely correct and raises the fear that many future pensioners will feel very frustrated if they have not accumulated any additional savings, as there will be many dreams that cannot be realized in retirement with just OASI and occupational benefits. Neither is that the job of the first and second pillar, quite honestly. Together, they are intended to enable people to adequately maintain their normal standard of living. Their personal provision must step in to fund their additional dreams.
Young adults under the age of 25 must first establish themselves in the workplace, want to enjoy their young years to the full and may start thinking about a family. Building up a third pillar is hardly front and centre. And it is easier to use the money in a savings account for consumption, holidays or a purchase. This probably goes for people in gainful employment with a monthly income of well under CHF 6,000 as well. The focus here is on financing the family, the home or the children’s education. Nevertheless, it is highly advisable for this group, too, to pay into the tax-privileged third pillar, as there should always be some money that can be diverted into making personal provision. Plus, a savings account does not have any tax benefits and at present does not yield any appreciable interest either. Therefore, the account is certainly not suitable for long-term personal provision.
First, I should say that under no circumstances do I want to suffer the typical pensioner’s ailment of the notorious lack of time. While I wish to approach the third age very consciously, I also want to leave a lot open and let things happen. I have set up a small consultancy so that I can share my in-depth knowledge and many years’ experience of retirement provision with various parties. Travel projects are also on the agenda. I will also read a lot and possibly boot up the computer to start my own blog or write a book – I definitely have enough exciting stories in my head. I am also pleased to be able to devote more time to my dear wife, the family and my friends.
On 1 July 2020, Hedwig Ulmer took over as Head Occupational Benefits at Helvetia.