The AHV has survived very well up to now. To what extent has this been attributable to immigration, in other words to the influx of new contributors?
The basis for the AHV's success is a smoothly functioning economy. When it's firing on all cylinders, a lot of people find work. And because all these employees pay their AHV dues and because of the rising participation in the labour market of women, of second-generation children of immigrants and also of the over 65s, we're seeing an ongoing upturn in contributions. Switzerland is an employment miracle – and to keep its economy running well, it needs both skilled and semi-skilled workers that it can also source from abroad. Up to now, the thriving economy has been able to shoulder the demographic burden without raising the contribution rate. Should the economy collapse in the wake of rising unemployment, an exodus of foreign skilled workers, wage dumping and other factors, the AHV would suffer a double blow. Firstly, contributions would slump and, secondly, the demographic factor would become far more onerous that it is at present.
So social security is dependent on the economy?
Yes, decidedly so! The economy and social security have a close inter-relationship. It's the job of the social security system to ensure that our highly dynamic society and performance-oriented economy remain sustainable. The economy and social security can no longer be separated. In the event that all compensation, pension, medical insurance, accident insurance and unemployment funds stop their payments, Switzerland would be paralyzed within a month.
It is well known that there are numerous different approaches to addressing the various challenges facing the AHV. What would happen if the political decision-makers decided to cut AHV benefits across the board?
Should the government decide to cut AHV benefits, this would happen via a formal change in AHV legislation which, in turn, would be dependent on an optional referendum. I have no doubt at all that such proposal to reduce benefits would be voted down. Politically, it would be a non-starter. People want security. The only possibility would be a reduction focused on today's unnecessary benefits, for example high supplementary pensions paid to AHV retirees for their children.
What role do supplementary benefits play in the pension system?
The supplementary benefits offered by the AHV and Disability insurance systems were introduced in 1966. They provide coverage for basic necessities and are intended to safeguard the livelihoods of all pensioners. They come into play for pensioners should the benefits they receive from the other social insurance plans fall short of a defined income minimum. For example, Canton Schwyz currently guarantees a minimum of CHF 37,230 for an AHV pensioner. While over the years, the AHV and second pillar have been steadily strengthened, current expenditure on supplementary benefits is alarmingly high. At around CHF 5 billion, it is approximately equivalent to Switzerland's defence budget and is likely to go on rising.
How could such a situation arise given the thoroughly robust 3-pillar system?
The soaring expenditure on supplementary benefits is attributable to several factors, such as longevity, the rising cost of nursing care, the politically endorsed expansion of benefit payments or the strong privilege accruing from the possession of significant assets. For example, in Canton Schwyz it is still possible to claim supplementary benefits even with taxable assets of CHF 1 million, provided the adjusted gross income in question does not exceed a defined level. With respect to the second pillar, another important reason for the hike in expenditure is the widespread use of lump-sum withdrawals in lieu of a pension. We've calculated that in Canton Schwyz in 2015, 44% of all recipients of supplementary benefits had previously withdrawn capital from the second pillar. For the whole of Switzerland, this figure was around 33%.
But can't people do what they want with their money?
In principle, yes. But the second pillar was established to ensure a secure retirement for people in the long term. For this reason, the employer is required by law to subsidize contributions and, at the same time, the state is obliged to forgo tax revenue which would otherwise accrue to it. When capital is withdrawn, not to secure a livelihood but rather to finance a luxury lifestyle for example, the pension fund cannot achieve its intended purpose. In my view, lump-sum withdrawals from the second pillar are not in the spirit of our Federal Constitution.
What concrete measures can be undertaken to stem the soaring costs of supplementary benefits?
In the next amendment to the federal law on supplementary benefits, Parliament needs to decide on restrictions. A sensible move would be to limit access to such benefits instead of just making savings around the system's basic parameters.