Second pillar: importance underestimated

The BVG, or the second pillar, often takes a back seat in the debate surrounding retirement provision. The fact that billions of Swiss francs from the investment income of active employees are used for current pensions also hardly leads to any resistance. This was shown by a study conducted for the second time on behalf of Vita and Zurich on the topic of "Fair Play in Occupational Pension Plans". The starting point for this study is a key finding from the first Fairplay study in 2021, which showed that 56% of the working population do not count BVG pension capital as part of their own assets. The current study has now investigated the reasons for this lack of awareness and shows that the bond with one's own retirement assets could be strengthened if its visibility were increased and/or if the population were given more say in BVG investments.

LOB savings - importance systematically underestimated

"The population is not aware of the importance of occupational pensions for their income in old age," notes study director Michael Hermann. Today, the second pillar (BVG) contributes a larger share of retirement income for average earners who retire than the first pillar (AHV). Nevertheless, working-age respondents rate the importance of the AHV for their financial security in old age as significantly greater than that of the BVG. They assume a split of 44 percent (AHV), 33 percent (BVG) and 22 percent (voluntary savings). "This distorted perception is matched by the fact that only 18 percent of the working population even know the sum of their own BVG pension capital," says Hermann.

LOB contributions - half perceive it as a fee or tax

Although BVG payroll deductions are paid directly into the personal retirement account, only 47 percent of those in employment perceive them as an investment in their own retirement capital. 28 percent see it as a kind of tax ("contribution to safeguarding pensions in Switzerland") and 21 percent consider the contributions to be a fee that must be paid. The design and naming of BVG contributions as a "payroll deduction" analogous to AHV contributions contribute to the fact that only 43 percent perceive their own retirement capital as part of their assets at all. "If the salary contributions to occupational pension plans have the character of a fee or tax for the insured, this weakens the basic idea of occupational pension plans as savings for one's own old age," Hermann explains.

Second pillar is usually not an issue with employment

Although the design of the pension fund differs significantly from company to company and involves large sums of money, the BVG is usually not an issue when hiring. "The structure of the occupational pension plan played a role in the hiring process for only 22 percent," says Hermann. Only 18 percent brought it up during the application process. Here, too, the BVG is invisible to the vast majority.

According to the study, it is striking that young adults are much less aware of the BVG than older people. Yet it is precisely the younger generation whose wealth accumulation is most affected in the long term due to the use of a large part of their investment income for current pensions. Overall, only one-third of the population is aware that part of the investment income of those in employment is currently used to finance current pensions.

SNB - more visibility and co-determination

What are the solutions to the problems that have been identified? "If awareness of and the importance of the BVG is to be increased among the population, it must become more visible and there needs to be more co-determination," Hermann explains. This is the assessment of the population, he says: 72 percent of the actively insured would welcome the possibility of using an app to obtain an overview of the pension situation at any time and from anywhere. Just as many are in favor of the possibility of choosing the pension fund (72 %) or the investment strategy themselves (71 %). In addition to such measures, a general improvement in investment knowledge in particular would also contribute to a better understanding of the BVG. Those who are familiar with investments usually have a very good understanding of the mechanisms of the BVG.

Redistribution in the SNB is considered unfair

Only one-third of respondents are aware that today around half of the investment income of working people is used to finance current pensions. However, if people of working age who contribute to the BVG are informed about this redistribution of their investment income, 63 percent consider this unfair. Even more, 78 percent of respondents, would find it unfair if part of the earnings from their pillar 3a retirement account were used for current pensions. "This shows that the personal connection to the pension capital is decisive for the fact that the use of earnings for others is perceived as unfair and alien to the system ", Hermann states.

Source: Vita Collective Foundations