The unpopular look at the wealthy retirees

The study had amazing explosive power. 14 years ago, the Federal Social Insurance Office (BSV) published a analysis from the University of Geneva on the economic situation of Swiss households. One message in particular caused a stir at the time: on average, pensioners were better off economically than the employed. The BSV director at the time, Yves Rossier, indicated in the foreword that, in view of the study results, in the next AHV reform, well-off pensioners should also make a “solidarity contribution” in addition to the employed. That didn’t go down well with everyone. According to the authors of the study and the BSV, they received a lot of feedback from angry pensioners. Many of those affected should have been aware that many pensioners were in good financial shape. But anyone who wanted to ask pensioners to pay had to dress warmly and expect a political crash.

This is still true today – and even more so due to demographics. About a third of those who go to the polls are of retirement age, and around 60 percent are over 50 years old. What is also true: on average, pensioners are in good financial shape. This is shown by the BSV published on Tuesday follow-up study from the University of Geneva for the year 2015. The analysis is based on a compilation of various databases, namely on taxes, household surveys and social welfare statistics. About half of the total population was recorded.

According to the analysis, the average annual income of Swiss households in 2015 was at a level that corresponds to the standard of living of a one-person household with an income of CHF 63,470. Statisticians call this “equivalent income”. The median value in the statistics means that half of the households were above this standard of living and the other half was below it. All sources of income are recorded, i.e. in addition to earned income, this also includes capital income and social payments. So that the assets are at least partly taken into account, the authors included 5 percent of the liquid assets in the annual income. On the other hand, the expenditure side, including compulsory payments such as taxes or health insurance premiums, was not a topic of the study.

That’s how you calculate

In order to compare different household sizes, the statisticians work with conversion factors. Accordingly, a one-person household with an annual income of CHF 63,470 has about the same standard of living as a couple household without children with an annual income of CHF 95,000. The conversion factor here is 1.5 and not 2, because a couple does not have to spend twice as much as a single-person household for the same standard. Every child under the age of 14 increases the conversion factor by 0.3 points (see graphic).

In addition to the level of prosperity, its distribution is also of political interest. In terms of social policy, the main question is the spread of poverty. The Geneva study does not speak of absolute poverty, but uses relative criteria to determine how many households have low or high means. Anyone who is below 50 percent of the median equivalised income is considered a household with “very little” means, from 50 to 60 percent one has “little” means. Values ​​over 180 percent, on the other hand, are considered “high”. Such relative criteria mean that, no matter how prosperous, there are almost always households with “poor” means. With an average income of CHF 1 million, all households with less than CHF 600,000 would have “little” or “very little” wealth. Relative criteria like these illustrate that as a society becomes more prosperous, so too do demands.

According to the above definitions, about one sixth of all households had little or very little means – and was therefore below the standard of living of a one-person household with an annual income of around CHF 38,000. Almost 9 percent of households had very little means. Single mothers are particularly at risk: a good third of these households had little or very little money. Other common risk factors include low education, unemployment, self-employment and non-European origin.

Age, on the other hand, is not a special financial risk. Due to the lack of employment, pensioners almost naturally have lower average incomes than employed persons, but the differences are remarkably small and would probably be even smaller if cost differences were taken into account. The proportion of households with very little means is about the same for employed (8 percent) and pensioners (9 percent). In the next level (low means), the proportion of pensioners is slightly higher. Overall, more than three quarters of all pensioner households had high means or were in the middle.

Many with great wealth

Measured in terms of total net assets, pensioners were on average much better off than the employed. In all age groups 65 and over, half of all households had net assets of more than 240,000 francs and a quarter were over 600,000 francs. According to the study, part of the increase from the age group 60-64 to the age group 65-69 can be explained by lump-sum withdrawals from occupational pensions. Many pensioners do not seem to have to live on their assets. The figures suggest that, on average, the net assets between the ages of 65 and 90 will hardly decrease (see chart).

Still far away for the boys

Around one eighth of all old-age pensioners in Switzerland officially receive supplementary benefits. The majority of pensioner households, on the other hand, appear to be financially well off. What was true 14 years ago is still true: the tendency towards a hidden redistribution from young to old, which continues to prevail in AHV and occupational pensions, cannot be justified “socially”. Rather, the laws of political mechanics are decisive here: Older people have a high voting power at the ballot box, people like to shift the burden onto later generations, once established privileges can hardly be taken away, and for the young the system of old-age provision is still a long way off from the focus of life and also difficult to understand.

The latest study on the financial situation of households is unlikely to change much in terms of old-age provision policy. In contrast to 2008, when the previous study was presented, no politically daring references to pensioner households could be heard on Tuesday. The personnel situation at the federal government has changed since 2008. At that time, Minister of Social Affairs was, together with Pascal Couchepin, a pugnacious Liberal; the BSV boss also belonged to the FDP. Today, Alain Berset is an SP man at the head of the department, and the BSV boss is a former SP politician.