Media focus on the coronavirus pandemic and the terrible war in Ukraine has meant that in the last couple of years a subject that is still of urgent concern to us all has been overshadowed, namely the increasing problems with financing pension provision and the resultant, increasingly urgent, need for reform. With the upcoming "OASI 21" referendum on 25 September 2022 this issue is, quite rightly, moving back into the spotlight.
The need for action remains unchanged. Some may think oh yes, it's fine, there have been good earnings on the stock markets in the last two or three years that will have filled the OASI and pension funds up nicely. People are still receiving their pensions in full and on time.
But appearances are deceiving. According to the latest forecasts from the Federal Social Insurance Office, OASI will go into the red from 2025 and will need to tap into compensation fund reserves. Even the planned reform will only provide four years of breathing space.1
The situation with regard to second-pillar pension provision is particularly dire. According to calculations by the Occupational Pension Supervisory Commission (OPSC), CHF 45.3 billion was redistributed from active insured persons to pensioners between 2014 and 2021.2
This means we are financing our pension system at the cost of future generations to an ever increasing extent. And until we finally move away from this precipice, we are blocking the implementation of many other reform measures. At this point I most definitely do not wish to comment on individual reform models. But I do want to make it very clear that it will be women – particularly younger women – who will be the most disadvantaged if we do not resolve the issues. This may initially sound absurd, after all as a result of the increase in the retirement age it is women who will be making the biggest contribution to the first step of the reform. That's correct, and I agree with all those who point out that women still do the lion's share of work in the home, and that too much of the wage gap can be attributed to this gender difference. However, blocking the reform will not make these disadvantages go away.
Especially when they are younger, women have pension shortfalls due to having children and working part-time, which are particularly pronounced when it comes to second-pillar provision. It is extremely difficult to make up these shortfalls, which means that women receive only half as much as men from their occupational pension funds.
Further reform measures could finally address these issues. For example women, and divorcees in particular, would benefit most from a reduction in the entry threshold for occupational pension schemes. They would also be the least disadvantaged by the urgently needed reduction in the conversion rate.
And incidentally, an increase in the retirement age will have the most advantageous effect on their pension provision. By working for a little longer, women could also have the chance to make up first-pillar pension shortfalls from earlier years. This is why it is high time we finally take this first step toward pension reform rather than procrastinating yet again.
1 Financial Perspectives for OASI up to 2032 (DE, FR, IT) (Federal Social Insurance Office, 25 May 2022)
2 2021 Report on the Financial Situation of Pension Funds (DE), p. 41 et seq. (Occupational Pension Supervisory Commission OPSC, 17 May 2022)