Pension at Risk: Is Our Pension System Under Threat? Future Scenarios for the Swiss 2nd Pillar

The Swiss 2nd pillar—a key component of the Swiss social system and of the utmost relevance to almost all Swiss workers and retirees—is currently experiencing a major stress test. Alongside ongoing increases in life expectancy, the recent surge in interest rates represents a considerable additional challenge for Swiss pension funds.

SFI Prof. Olivier Scaillet (UNIGE)—along with Marc Fournier, Dr. Olivier Kern, and Stéphane Riesen, all of Pittet Associés Ltd—analyzed the overall stability of the Swiss 2nd pillar on behalf of the Federal Social Insurance Office early in 2022. Their work was based on individual data for the entire universe of Swiss pension funds—a novelty—and painted a broad set of outcomes based on various potential economic scenarios for the next ten years.

Recently, the authors decided to update their study based on the latest (and likely further, upcoming) interest rate increases and to showcase their findings in an SFI Public Discussion Note (PDN). Their revisited results show that the Swiss 2nd pillar is robust overall, but that in a recession scenario all Swiss pension funds would be at risk, with collective foundations and large pension funds facing the bulk of the financial pressure. In addition to their detailed analysis of the effects of the current environment, the authors use the PDN to discuss ways to strengthen the financial stability of the Swiss 2nd pillar. Their various recommendations include ensuring a structurally adequate financing of benefits and strengthening the supervisory framework by standardizing investment control processes.

Read the SFI Public Discussion Note in English I French I German I Italian.