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Swiss pension system among ‘world’s best’

Switzerland has one of the best pension systems in the world but it lags behind those in Denmark and three other countries, according to an Australian study.

Published: 13 October 2014 22:25 CEST
Swiss pension system among 'world's best'
Photo: AFP

The Swiss rank fifth in the Melbourne Mercer Global Pension Index for 2014, released on Monday, which compares retirement schemes in 25 countries.

Denmark topped the study with a “first class and robust retirement income system that delivers good benefits, is sustainable and has a high level of integrity”.

Switzerland places behind Australia, the Netherlands and Finland in the ranking.

Like the three countries with a higher ranking, Switzerland has a pension system “that has a sound structure with many good features, but has some areas for improvement that differentiate it from an A-grade system”.

Denmark is the only country given an A grade, while Australia and the Netherlands get a B+, and Finland and Switzerland rate a B.

Sweden, Canada, Chile, the UK and Singapore rank behind Switzerland but also received a B grade in the report that assesses the “adequacy, sustainability and integrity” of retirement income programs in different countries.

The report says that Switzerland could improve its pension system through a number of measures , including by “increasing the state pension age over time”.

The Swiss statutory retirement age is 65 for men and 64 for women.

By comparison, Denmark has raised the retirement age to 67 from 65 for citizens born in 1955 or later, while it will be hiked further for those born after 1962.

Switzerland’s pension system consists of an earnings-related public pension with minimum benefits, a mandatory occupational pension scheme and voluntary plans offered by insurance companies and financial institutions.

The study says the Swiss system could also be improved by reducing “pre-retirement leakage by further limiting access ti funds before retirement”.

The minimum age for early retirement (through an occupational or second pillar pension) in Switzerland is 58.

It is also possible to withdraw a state (AHV) pension one or two years ahead of the official retirement date, although with a financial penalty.

The study says that other improvements could be made by:

– introducing a requirement that part of the retirement benefits must be taken as an income stream

– reversing the preferential tax treatment of lump sum payments in comparison to pension payments

– requiring plan trustees to develop a comprehensive risk management policy

For a look at the full report, click here.
 

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READER QUESTION

EXPLAINED: Can I terminate my Swiss telecom contract early?

When you sign up with a telecom provider in Switzerland, your fate is sealed: you must remain with that company until your agreement expires. But what if you want to get out of the contract ahead of schedule?

Published: 24 July 2024 13:21 CEST
EXPLAINED: Can I terminate my Swiss telecom contract early?

On July 24th, 2024, Switzerland’s largest telecom operator, Swisscom, has abandoned its inOne Home package, which includes the telephone, Internet and television, and replaced it with another service, Basic Home.

But the cost of the subscription increased from 50 francs a month to 59.90 francs.  

If you happen to be one of the Swisscom customers affected by this change, but did not cancel your subscription on time (read more about this below), you were ‘migrated’ to the new bundle automatically — and will be charged accordingly.

What happens if you don’t want this more expensive service but have not cancelled your contract in time?

More specifically, can you terminate your telecom subscription — whether with Swisscom or another company — at any time?

The simple answer is yes, but it will cost you money.

That’s because telecom contracts typically have a minimum term — usually 12 or 24 months, but this can vary — as well as the required cancellation notice period.

Each of Switzerland’s three main telecom providers — Swisscom, Sunrise, and Salt — have a two-month termination notice period, at calendar month’s end.

This is the usual notice period for smaller providers like Yallo, Wingo, Coop Mobile, LidlConnect, and M-Budget Mobile as well.

On the other hand, prepaid mobile services don’t require notice periods and can be terminated at any time.

What are the penalties for early termination?

If you cancel your service within the contractual notice period, then you are in the clear.

However, failing to do so can be expensive.

The reason is that telecoms will not just let you off the hook and wish you well while you contract with one of their competitors.

Most likely, you will be faced with one of two scenarios: the company will charge you penalty fees or continue to bill you for the plan until the notice period has expired.

Also, according to Moneyland consumer platform, “a practice that is widespread among Swiss telecom companies is to continue charging you the basic fees for your plan until the contract term expires… Regardless of whether you are terminating ahead of the contract term or just the notice period, telecom companies will require you to pay the full outstanding amount in both cases.”

In terms of actual amounts, they vary from one provider to another.

Swisscom charges the highest penalty fees for breach of contract — up to 4,800 francs.

Other mobile service providers impose penalties of several hundred francs, according to Moneyland.

Exceptions to the rule(s)

You are allowed you to terminate your contract early without penalties when a ‘negative’ change is made to your plan — that is, telecom provider reduces or drops services that were previously included.

Penalties can also be waved if you cancel your subscription early because you move out of Switzerland.

If you relocate within Switzerland, you won’t have to pay penalties, but only if your new home is completely uncovered by your provider’s mobile network.

Additionally, even though Swiss telecoms have a contractual right to raise their prices once a year to match changes in the consumer price index, these increases do entitle customers to terminate their contract early without penalty fees.

And, last but not least, death is also deemed a justifiable excuse to wave penalties.

As Moneyland put it, “all Swiss telecom companies take a customer-friendly approach in the case of death, allowing relatives to terminate the deceased’s contracts immediately without paying penalty fees.”

Can you just refuse to pay the early termination fees?

Unless you move out of the country, or go to live in an extremely rare place in Switzerland where there is no wi-fi coverage (like a cave), or die, then you do have to pay the penalties — unless you come to an amicable agreement of some sort with your telecom provider.

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