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Age poverty Switzerland

Age poverty is real

The future pension is such a topic, which one likes to push on the long bank. The least is really clear, what happens when the various "cogwheels" like interest, average return, inflation, conversion rate, longer life-time, higher pension deductions is rotated. Interest rates and the average return are given by macroeconomic conditions. At the moment, both are far from the decade-long average of 4% for years and are below 1%. We can hardly influence inflation either. However, since this is higher than 1%, real capital decreases every year.

The policy tries to turn  the wheels that can be influenced: conversion rate, longer life-time, higher pension deductions, etc. to compensate the pensions for the increasing number of retirees compared to the working population. However, the calculation does not work for both groups, the working population and pensioners. While the former are hit by higher cost of living (health insurance premiums and higher rents in urban areas) and threatened longer working lives, retirees get real less and less money.

It was a lot better for our parents. These benefited from the high interest rates of the pension capital, which led to a doubling of the pension capital over the lifetime of workin. Inflation was lower than interest rates and conversion rates higher. On the whole, much more real money remained than today and in the future. Usually people were able to invest their own property or to invest in valuables and sell them in old age, which also led to much higher capital formation. This is hardly possible today with strikingly high land and property prices and weak returns on securities.

The recently lost vote on the pension system in Switzerland has clearly demonstrated the inability and deafness of the policy to change the essentials of the situation. The people voted well and said that it was not going any further. A radical new system is required. Where this is to come from, however, in the stars. Neither proponents nor opponents can make profound proposals. The issue is extremely complex and most Western countries are caught in the low interest rate, high debt and capital consumption. Profiteers of the situation are, however, the states, companies and corporations with high debt, since the debt service is to be managed with low interest rates. All of this we owe to the overwhelming consumer society to the detriment of the growing population.

It is only to be hoped that the next pension reform will take this into account. If we are to prevent age poverty, the discussion must be conducted without ideological blinkers.

If the sovereign succeeds in the next redemption reform the big litter, but it is too late for the current seniors. These will hardly be able to benefit from higher real pensions.

As a possible way to change the situation personally, one could consider living abroad. To this end, we have already published various articles in our blog.