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No 2 May 2012

NEWSLETTER Demographic information

Foreword To mark the ”European year of active ageing and intergenerational solidarity“, the second Demos newsletter in 2012 is dedicated to the working life and economic situation of older ­people. Faced with the ageing of the population, one of society’s greatest challenges is to meet the needs of the labour market. The decline in the population of working age threatens to weaken economic growth. In order to face the challenge of a declining workforce, it is important to mobilise the potential of older ­people. Active ageing must therefore be encouraged in the workplace, by introducing working conditions that are flexible and adapted to the state of health and needs of older people.

Summary Active ageing – Older people in the Swiss labour market

2

– The three pillars of the old-age insurance system: insured persons and pension recipients

5

– Living conditions of older people in Switzerland

8

– The household budget of retirement-age people

11

For further information on active ageing

The first article in this publication deals with the economically active population aged 55 and over. What are the characteristics of older people in the labour market and in which economic branches are they most present? How are they affected by unemployment? How many of them continue working once they have reached retirement age? The second article presents our social security system and gives some figures on pensioners. Is the population well-insured? Which insurance pillars finance the different pensions? The third article covers the living conditions of older people in our country and their financial situation. Are they more at risk of poverty and material deprivation? Are they better or less well off in Switzerland in comparison with their European neighbours? The fourth article considers the household budget of retirementage people. What is their available income? How much is left for savings once all expenditures have been deducted? We hope you find our newsletter interesting!

25% of all pensioners up to 5 years after legal retirement age receive benefits from all 3 pillars of the old-age insurance system.

NEWSLETTER

* Fabienne Rausa, Federal Statistical Office

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Older people in the Swiss labour market The ageing of the population is also having an effect on the economically active population in Switzerland. In 2010, 18 out of 100 workers were aged 55 or over and their share is likely to increase over the next 15 years. Over-represented in certain economic branches older people behave differently from younger workers, particularly in terms of professional mobility and working hours. One person in seven continues working – usually on a part-time basis – after having reached legal retirement age. Due to the ageing population in Switzerland as in the majority of European countries, the employment situation of workers aged 55 and over (older people1) is an integral part of economic and social debate. In 2010, on there were 786’000 economically active persons aged 55 and over, i.e. 17.5% of the economically active population. Their share rose 2.3 percentage points in comparison with the year 2000, due in particular to the ”baby boom“ generation born at the end of the 1950s having reached the age of 50. The ageing of the economically active population can be seen for men (16.5% of workers were 55 or over in 2000 compared with 18.7% ten years later) and for women (2000: 13.8%; 2010: 16.2%). This ageing is especially noticeable within the Swiss economically active population (the share of older people rose from 16.5% in 2000 to 20.0% ten years later), the share of economically active persons aged 55 or over among the foreign economically active population having declined slightly (2000: 10.7%; 2010: 9.6%). According to the medium scenario of population projection in Switzerland, the share of workers aged 55 and over in the economically active population should reach 21.2% in 2060 (Graph G1) after having peaked at 22.3% between 2025 and 2027.2

Share of persons aged 55 or over in the economically active population (1996 to 2010) and projection population (2011 to 2060)

G1

25% 20%

The participation of older people in the labour market is increasing In 2010, the activity rate3 of persons in Switzerland aged 55 to 64 was 70.5%, an increase compared with 2000 (65.1%). This is due to the 9.3 percentage point rise in the activity rate for women over the past 10 years (2000: 51.3%; 2010: 60.6%). During the same period, the activity rate for men only increased slightly (2000: 79.3%; 2010: 80.5%). The increase in women’s activity was helped by the gradual raising of the retirement age in 2001 and 2005, by easier access to the labour market due to growth in part-time employment and by the expansion of the service sector of the economy (cf. FSO, 2011). The very slight increase in activity for men can be explained by the loss of jobs in the secondary sector but also by large numbers of men taking early retirement in the first years of the period under observation (see below).

The activity rate for older people in Switzerland is comparable to that of Scandinavian countries. In international comparison, Switzerland, together with Iceland (83.5%) and Sweden (74.5%) belongs to those countries where more than seven out of ten persons aged 55 to 64 were economically active in 2010 (EU average: 49.7%). In the EU, the gap between the country with the highest activity rate (Sweden) and that with the lowest (Malta: 31.6%) is considerable. In comparison with the year 2000, the average activity rate of older people in the EU increased by 10.0 percentage points, compared with 5.4 percentage points in Switzerland. The rate of change, however, varies greatly between the EU member states, and those countries with the lowest activity rates are not necessarily the ones where the increase has been greatest (Graph G2). The gap between the activity rates of men and women aged 55 to 64 is large in Switzerland and within the EU, but it is narrowing. In 2010, it was 19.9 percentage points in Switzerland (a fall of 8.1 points on 2000) and 17.8 points in the EU (a fall of 3.2 points). Cyprus and Malta are the two states with a gender gap of more than 30 percentage points whereas in Estonia and Finland the activity rates are almost the same for both sexes. In Finland, the activity rate for women has even exceeded that of men since 2009.

15% 10% 5%

Change according to SLFS ”Medium“ scenario

2060

2055

2050

2045

2040

2035

2030

2025

2020

2015

2010

2005

2000

1995

0%

”High“ scenario ”Low“ scenario © FSO

Sources: SLFS, population projections

1

For this analysis,”older people“ are workers aged 55 or over. In keeping with the indicators, specific age groups are used (55 or over, 55 to 64, 65 to 74).

2

2010–2060 population projection in Switzerland. The rate reaches 23.0% in 2060 for the ”high“ scenario and 19.7% for the ”low“ one.

2

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Activity rate= (persons in employment + unemployed persons based on the ILO (International Labour Organization) definition)/permanent resident population

3

INFORMATION


Activity rate of persons aged 55 to 64, Switzerland and EU/EFTA countries, 2000/2010

G2

Iceland Sweden Switzerland Norway Estonia Germany Denmark Finland United Kingdom Cyprus Latvia Lithuania The Netherlands Ireland Portugal Spain EU27 Czech Rep. Bulgaria Greece Slovakia Austria Romania France Luxembourg Belgium Italy Hungary Poland Slovenia Malta 0%

Employment status of employed persons by age group, G3 2010

Aged 15 to 54

11.0 1.5

Aged 55 to 64

21.1

Aged 65 or over

87.5

2.1

76.8

43.8

0%

20%

14.8

40%

41.4

60%

80%

100%

Self-employed persons as well as employees who own their own business Family employees Employees Source: SLFS

© FSO

Considerable ageing of certain economic ­branches in the tertiary sector

10% 20% 30% 40% 50% 60% 70% 80% 90% 2010 2000

Sources: SLFS, EUROSTAT

© FSO

Part-time work more frequent among older people A proportionally higher number of workers aged 55 to 64 carry out their main occupation on a part-time basis (39.2% compared with 33.2% among 25 to 54 year olds). The gap can be observed for women (70.3% compared with 60.7%) and men (15.5% compared with 9.7%).

More self-employed among older age groups

The increase in the number of older people (55 to 64 year olds) in the employed population does not affect all economic sectors equally (Graph G4). Whereas agricultural activities (branch ”Agriculture and forestry“ (2000: 16.7%: 2010: 17.7%)) and public administration (2000: 16.4%; 2010: 17.3%) continue to employ the largest proportions of older people, considerable ageing can be observed in the branches ”Arts, leisure, private households, others“ (+4.9 percentage points reaching 17.3% in 2010), ”Human health and social work activities“ (+4.9 points to 16.1%) and especially ”Teaching“ (+5.5 points to 17.9%); in contrast to 2000, in 2010 all three employ a number of older people that is proportionally higher than the Swiss average (2000: 12.7%; 2010: 14.9%). Ageing is also pronounced in the branches ”Real estate, administrative activities“ (+3.0 percentage points to 15.7%), ”Specialised, scientific and technical activities“ (+3.9 points to 14.7%) and ”Transport and warehousing“ (+3.1 points to 15.4%). Ageing of the persons in employment in the branches ”Trade and repairs“ (+1.6 points to 14.0%), ”Construction“ (+1.2 points to 12.1%) and ”Hotels and restaurants“ (+1.3 points to 11.6%) is much less marked. As far as the branch ”Information et communication“ is concerned, the share of older people has declined and in 2010 represented only one worker in ten (-1.5 points to 9.6%).

The share of older people who are self-employed4 is relatively large. In 2010, more than one in five employed person aged 55 to 64 (21.1%) carried out his or her main occupation on a selfemployed basis compared with one in nine (11.0%) among employed persons younger than 55 (Graph G3). Professional experience, the difficulty of finding work as an employee after the age of 50 and the lesser likelihood of self-employed persons to take early retirement are all factors which may explain this high proportion.

4

The term self-employed includes all self-employed persons as well as em­ ployees who own their business. NEWSLETTER

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Share of employed persons aged 55 to 64 by economic branches, 2000 and 2010

G4

Share of employed persons who changed jobs between 2nd quarter 2008 and 2nd quarter 2009, by age groups

G5

Teaching Agriculture and forestry

Aged 15 to 24

Arts, leisure, private households, others

Aged 25 to 39

Public administration, extra-ter. org.

28.3 10.2

Aged 40 to 54

5.8

Human health and social action

Aged 55 to 64

Real estate, administrative activities

2.2

Industrial activity, energy prod. Transport and warehousing

Total (aged 15 to 64)

SWISS AVERAGE

9.2 0%

Specialised, scientific and technical activities Source: SLFS

Trade and repairs

5%

10%

15%

20%

25%

30% © FSO

Construction

Older people are (proportionally) less affected by unemployment

Hotels and restaurants Financial activities, insurances Information and communication

0%

5%

10%

2010

15%

20%

2000 © FSO

Source: SLFS

Older people loyal to their employer The structural and economic changes on the labour market have not really had an impact on the length of employment of older people. In 2010, workers aged 55 to 64 years old had been working for their current employer for an average of 17.8 years, i.e. 0.5 years less compared with the year 2000 (18.3 years). In 2010, women aged 55 to 64 had been in their current job for an average of 15.3 years compared with 19.8 of men in the same age group. Within 10 years, the gap has narrowed slightly. Fewer women are withdrawing completely from the labour market to devote themselves to their family, even for a short period of time.5 The turnover rate6 by age shows a decreasing relationship between age and mobility in the labour market: in 2009, over a one-year period, only 2.2% of older people had changed employer compared with 5.8% of 40-54 year-olds, 10.2% of 25–39 year-olds and 28.3% of 15–24 year olds (Swiss average: 9.2%; Graph G5).

In 2010, the unemployment rate based on the ILO definition7 was 3.5% among economically active persons aged 55 to 64 compared with 4.2% for those aged 25–54. This gap can be observed particularly among women (3.5% for 55–64 year-olds compared with 4.7% for 25–54 year-olds). Among men, the unemployment rates of the 55–64 year-olds and the 25–54 year-olds are closer (3.5% and 3,8% respectively). These differences should, however, be interpreted with care; many people lose their job more or less of their own free will in order to take early retirement or for health reasons and therefore do not join the ranks of the unemployed. (cf. Egger, Moser, Thom, 2008). Older people are more at risk of experiencing a period of longterm unemployment. Among the unemployed based on the ILO definition, more than one in two older persons aged 55 to 64 (53.1% in 2010) have been unemployed for longer than a year, compared with 35.7% of 25 to 54 year-olds. Unemployed persons beyond their fifties are less flexible: only 20.8% of them would be prepared to move in order to take up a new job compared with 29.8% of 25–54 year-olds. The large proportion of home owners among older people who are unemployed based on the ILO definition (31.8% compared with 23.5% of 25–54 year-olds) also explains this lack of flexibility.

Looking for a full-time job but prepared to work part-time Six in ten unemployed persons based on the ILO definition aged 55 to 64 (60.8%) are looking for a full-time job; almost all of them, however, are prepared to accept a part-time job. Among unemployed persons looking for part-time work, only 3 in 10 would be ready to work full-time if the opportunity presented itself.

5

Detailed data on activity rates broken down by family situation are available on the FSO’s Swiss Statistics Portal.

6

Net turnover rate: employed person who changed jobs between the year t-1 and year t in relation to employed persons for the year t-1

4

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Unemployment rate as defined by ILO = number of unemployed as defined by ILO/permanent economically active resident population

INFORMATION


Having peaked in 2006, the share of people taking early retirement is on the decline In 2010, the early retirement rate8, calculated on the basis of the five years leading up to the legal retirement age, was 17.1%, a level close to that of the year 2000 (17.5%). However, its development was uneven during the period 2000– 2010. The early retirement rate rose initially during the first five years of the decade. This increase coincided with the gradual increase in legal retirement age for women and with provisional financial measures enabling early retirement under favourable conditions. Having peaked in 2005 and 2006 (21.4% for both years), the early retirement rate subsequently lost more than 4 percentage points within 4 years. The lowering of conversion rates for 2nd pillar pensions, the adjusting of peoples’ behaviour to the new legal standards and the period of economic boom between 2006 and 2008 may explain this change in trends.

Early retirement rate, calculated on the basis of the five years leading up to legal retirement age, average 2005 to 2010, by economic branches Financial activities, insurances Transport and warehousing Public administration, extra-ter. org. Information and communication Construction Teaching SWISS AVERAGE Industrial activity, energy prod. Real estate, administrative activities Arts, leisure, private households, others Trade and repairs Human health and social action Specialised, scientific and technical activities Hotels and restaurants

Early retirement rate highest in the branch ”Financial and insurance activities“ The early retirement rate calculated on the basis of the five years leading up to the legal retirement age varies greatly depending on the economic branch: the gap between the branch with the highest and the lowest rates is 38.9 percentage points (Graph G6).9 Workers in the branch ”Financial activities, insurances“ register the highest early retirement rate (45.8%), followed by the branches ”Transport and warehousing“ (34.7%) and ”Public administration“ (32.8%). In the branches ”Agriculture and forestry“ (6.9%) and ”Hotels and restaurants“ (10.0%), fewer than 1 in 10 workers take early retirement.

Work beyond the legal age of retirement is usually carried out on a part-time basis Reaching legal retirement age does not mean the end of working life. In 2010, one in seven persons (14.5%) aged 65 to 74 were still carrying out a professional activity. During the period 2000–2010, this rate varied between 12 and 15%. In Switzerland men are proportionally twice as likely as women to remain professionally active beyond legal retirement age (19.4% compared with 10.4%).This gap has been stable since 2000. Among employed persons aged 65 and over, persons with tertiary level education are clearly over-represented; there is also an over-representation of self-employed persons (44.2% of employed persons aged 65 and over), persons working in a family business (12.0%) and part-time workers (73.4%; average working hours are equal to a half-time job). In the European Union, the activity rate of 65–74 year-olds (2010: 7.7%) is almost half that of Switzerland. The differences between countries are considerable (activity rate of 65–74 year olds varies from 2.5% in Slovakia to 35% in Iceland).

8

Early retirement rate = people in early retirement/(people in early retirement + economically active persons). The rate is based on the 5 years prior to the legal retirement age in order to be able to work on sufficiently large samples. Calculating the rate on the basis of 1 year prior to the legal age would lead to much higher numbers.

9

Average rate for the years 2005 to 2010. NEWSLETTER

G6

Agriculture and forestry 0%

10%

20%

30%

40%

Source: SLFS

50% © FSO

* Thierry Murier, Federal Statistical Office

Bibliography: FSO (2011), Labour market indicators 2011, Results with comments for the period 2005-2011, FSO News, Neuchâtel. Egger M., Moser R. and Thom N. (2008), Arbeitsfähigkeit und Integration der älteren Arbeitskräfte in der Schweiz – Studie I, SECO Publikation Arbeitsmarktpolitik No 24, Bern.

The three pillars of the old-age insurance system: insured persons and pension ­recipients With its three pillars, Switzerland’s old-age insurance system is considered to be very successful. But how is the populations’ insurance situation in reality? How many employed persons pay contributions to which insurance? How many pensioners receive which benefits? And which of the three pillars do people use to finance their early retirement? Switzerland’s system of old-age provision consists of three pillars. The aim is to maintain the usual standard of living in old age or in case of disability as well as that of surviving dependants upon the death of the insured person. The first pillar consists of the old-age and survivors’ insurance (AHV/AVS) and the disability insurance (IV/AI). It is regulated by the State and is compulsory for all persons either resident or employed in Switzerland. Together with any supplementary benefits it is intended to cover basic living costs.

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Occupational pension funds (BV) make up the second pillar. They are compulsory only for employees whose income exceeds a minimum threshold established each year. Employees whose income is below the threshold and self-employed persons can, however, also opt to insure themselves. Persons taking early retirement can receive an additional bridging pension until they reach legal retirement age. The first two pillars are intended to provide 60% of the final working salary10 and make it possible to continue one’s previous lifestyle.

All figures used in this analysis come from SESAM (synthesis survey social protection and labour market) from 2008. The source is based on data from the Swiss Labour Force Survey (SLFS) linked with information from social insurance registers (AHV, IV, EL, and ALV). In addition, data from the additional module to SLFS ”Social Security“ was available for the year under observation, which asked specific questions on the transition from working life to retirement as well as on pensions and payment of pensions.

The third pillar is an optional individual provision. Linked pensions (3a pillar) in contrast to unrestricted pensions (3b pillar) offer certain tax benefits. The third pillar enables people to top up their income independently. The following explanations take only the 3a pillar into account.

All data are from the year 2008.12 This means that various groups of persons were observed. Those persons who paid into the old-age insurance system in 2008 are not the same ones receiving benefits in the same year. There can be exceptions for persons in the same age group, when a person is still paying into one pillar but already receiving benefits from another pillar.

This article sets out to describe the insurance situation of retirement-age people. The analysis is carried out for the three following groups of persons:

State of insurance of the employed population

Observations began with employed persons aged 55 until one year before legal (AHV) retirement age (63 years for women and 64 years for men). We examined the extent to which this age group contributes to the three pillars of old-age provision thus establishing an entitlement to claim benefits in the future. Particular importance was placed on the variables sex and employment status (employee, self-employed). On the basis of this analysis, we then examined the benefits received by persons who receive at least one benefit from the old-age insurance system. We paid particular attention to benefit recipients from the following two age groups: persons up to 5 years before legal retirement age (early retirement) and persons up to 5 years after legal retirement age (pensioners)11.

In 2008 just under 71% of persons aged 55 to 64 (63 for women) were in employment, 55.8% as an employee and 15.0% in self-employment. Whereas 77.0% of men were in employment, 64.0% of women were. 9.6% of men and 10.1% of women were self-employed. Over half of all employees are insured by all three pillars. This concerns more men (64.9%) than women (48.9%). Another 27% are insured by the AHV/IV and the 2nd pillar. Here the proportion of men and women is similar. Overall just under 10% of employees are insured by only the first pillar. There is a considerable difference here between women (15.6%) and men (4.0%). The remaining 6.2% are insured by pillars 1 and 3a, again with a clear difference between men (3.5%) and women (8.5%). The wages of persons in the last two groups are lower than the occupational pension funds threshold for compulsory insurance. The gender differences are probably due to the fact that women are more frequently employed in jobs with lower wages and/or fewer working hours. Further analysis shows that 37.7% of all employed persons in the age groups under observation do not contribute to a 3a account due to financial reasons, but 57.6% have other reasons for not doing so.

Share of employees and self-employed persons (men aged 55–64, women aged 55–63) with contributions to 11, 22 and 3a pillars, as percentage, 2008 Employees

Self-employed persons3

Total

Men

Women

Total

Men

Women

Pillars 1, 2 & 3a

57.7

64.9

48.9

29.4

34.2

(19.7)

Pillars 1 & 2

26.9

27.6

26.1

11.6

12.1

(10.5)

1st pillar

9.3

4.0

15.6

29.2

23.9

39.8

Pillars 1 & 3a

6.2

3.5

8.5

29.9

29.8

30.1

  Since all persons residing in Switzerland are obliged to be insured under the first pillar (AHV/IV), it is found in all possible combinations.

1

 The only criterion that applies for the second-pillar insurance is the level of income. Despite an income below the minimum limit, employees can be voluntarily insured in a pension fund. For this reason, the values can easily be underestimated.

2

  Only ”real“ self-employed, excluding family members in the same business and persons employed in private households who declare themselves as self-employed.

3

(Figure): Extrapolation based on fewer than 50 observations. The results should be interpreted with great care. Source: SESAM

Federal Social Insurance Office (2007) Strategie für eine schweizerische Alterspolitik, Bern.

10

This analysis was interested in persons around retirement age.

11

6

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In 2008, data for the additional module to the SLFS “Social Security“ was gathered for the last time.

12

INFORMATION


Self-employed persons prefer other insurance combinations. Only just under 30% are insured by all three pillars of the oldage insurance system. Another 11.6% pay AHV/IV and occupational pension funds contributions. Almost another 30% are insured only by the first pillar. While the combination of AHV/ IV and 3a pillar has few takers among employees, this form of old-age provision is chosen by 30% of self-employed persons. The reasons for these differences are on the one hand due to the fact that it is not compulsory for self-employed persons to contribute to the occupational pension funds and on the other the different maximum annual amounts for a contribution to pillar 3a. Whereas employees could deduct a maximum of CHF 6,365 from taxes in 2008, for self-employed persons this figure was CHF 31,824.

Receipt of benefits from the old-age insurance system, women taking early retirement aged 59–63 and men taking early retirement aged 60–64, as percentage, 2008 G 7 Advanced payment of AHV-/AVS pension1 Bridging pension

22.8

Pensions beneficiaries before the legal retirement age In 2008 42.8% of the persons in the age group under observation were in early retirement, 48.4% of men and 36.4% of women14. The higher the educational level, the higher the early retirement rate. The 9.6% of persons in this age group (6.1% of men and 13.6% of women), who are neither in employment nor receiving a benefit from the old-age insurance system were not taken into account. Almost a quarter of persons taking early retirement receive AHV benefits. As AHV can be received no earlier than two years before legal retirement age, this percentage only concerns persons from the relevant age category. The differences between men and women are considerable here. Whereas approximately 43% of all women taking early retirement receive an AHV pension, only 8.7%15 of men taking early retirement do so. These differences are reversed as far as the bridging pension is concerned. Whereas 22.8% of women taking early retirement receive such a pension, for men taking early retirement this figure is 42.0%.

42.0 71.1 73.3 68.0

BV benefits 33.6 36.3 29.7

3a pillar benefits 0%

20%

40%

60%

80%

100%

Share of early retired persons, who receive respective benefits Total 1

Pensioners are defined as men and women aged 64-69 and men aged 65–70 who regardless of employment receive a benefit from the old-age insurance system13.

42.9 33.9

Next we asked how many people were receiving benefits from the old-age insurance system. For this we analysed the following two groups of persons: Persons taking early retirement are defined as women aged 59–63 and men aged 60–64 who regardless of employment receive a benefit from the old-age insurance system.

23.9

(8.7)

Men

Women

Only persons up to two years before legal retirement age.

Source: SESAM

© FSO

71.1% of people taking early retirement receive a benefit from the 2nd pillar. Of these, 43.6% of people taking early retirement receive a pension and 36.2% receive a capital payment in connection with the early retirement.16 The differences between the sexes as regards 2nd pillar recipients are small. This is not least because in general the women registered as taking early retirement are those who were in employment (or still are) and are therefore entitled to claim benefits. A good third of all employed persons receive a capital payment from their 3a pillar when taking early retirement. Just under 7% of recipients convert their capital into a regularly-paid pension.

Pensions beneficiaries after the legal retirement age 98% of persons up to 5 years after legal retirement age were pensioners according to the above definition. The remaining 2% were for the majority either foreigners who did not benefit from the Swiss old-age pension system or persons who had postponed their benefits and are possibly still in employment. Almost 98% of all pensioners up to 5 years after legal retirement age receive an AHV/AVS pension. As insurance by the AHV/AVS is compulsory, it can be obtained by most people of retirement age. 67.3% of all pensioners can fall back on a pension from the occupational pension funds and just under a third on a benefit from the 3a pillar. As almost the whole population is included in the age group under consideration, the differences between men and women are more pronounced. Whereas just under 81% of male pensioners receive benefits from the occupational pension funds and 42.3% of them benefits from the 3a pillar, 56.8% of female pensioners receive benefits from the occupational pension funds and 25.3% from the 3a pillar. These differences are mainly attributable to the different employment histories of men and women.

This definition focuses exclusively on the institutional aspect of the old-age insurance system.

13

Only persons who were employed at least until the age of 50 were taken into account.

14

Extrapolation on fewer than 50 observations and to be interpreted with caution.

15

NEWSLETTER

Among all recipients of benefits from Occupational pension funds, 49% received a pension only, whereas 38.8% received a capital payment only. 12.3% received both a capital payment and a pension.

16

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Receipt of benefits from the old-age insurance system, female pensioners aged 64–69 and male pensioners aged 65–70, as percentage, 2008

G8 97.6 96.9 98.1

AHV/AVS pension

67.3

Benefit from BV

81.7 56.8 32.7

Benefit from 3a pillar

42.3 25.3

0%

20%

40%

60%

80%

100%

Share of pensioners, who receive respective benefits Total

Men

© FSO

Interesting additional information on the funding of pensions can be drawn from the possible combinations of pensions and benefits. 25% of all pensioners receive benefits from all three pillars of the old-age insurance system. A further 40.3% receive benefits (pension and/or capital) from the first two pillars. Almost 80% of men are to be found in one of these combinations. Women, however, are most likely to receive only an AHV/AVS pension. Overall, 27% of pensioners (men and women) are in this situation. Here one should not ignore the possibility that these persons could have another source of income that does not come from the old-age insurance system. Furthermore, these figures relate only to individual persons. If households are taken into consideration, only 8.7%17 of couple households receive exclusively an AHV/AVS pension from the old-age insurance system. For single person households this holds true for 17.4% of men and 23.8% of women.18 The other combinations (AHV+3a; BV+3a) are rather rare among persons of retirement age.

Combination of benefits received from the old-age insurance system, female pensioners aged 64–69 and male pensioners aged 65–70, 2008

* Olivia Huguenin, Federal Statistical Office

Bibliography: FSO (2011), Indikatoren zur Alterssicherung, Resultate der Schlüsselindikatoren, FSO Aktuell, Neuchâtel FSO (2011), Indikatoren zur Alterssicherung, complete, online indicator set. Federal Social Insurance Office (2007), Strategie für eine schweizerische Alterspolitik, Bern. Indicator system on old-age provision: In May 2011 the FSO made available on its website an indicator system on old-age provision: nearly 50 indicators to observe the situation of the older population from many different aspects. In addition to SESAM, data sources for the indicator system include the Swiss Health Survey (SGB), the Nursing homes statistics (SOMED) and the Pension funds statistics. The next SFLS survey with the ”Social Security“ module will be conducted in 2012 and will enable indicators to be updated.

G9

Living conditions of older people in Switzerland

Total

What is the financial situation of older people in Switzerland? Are they at greater risk of poverty and material deprivation? How do they assess their living conditions? Are older people better or worse off in Switzerland than their European neighbours?

Men

Women

0%

20%

40%

60%

80%

100%

Share of pensioners, who receive each combination of benefits AHV/AVS (incl. EL, HE)1 AHV/AVS+BV

AHV/AVS+BV+3a AHV/AVS+3a

BV+3a

Including supplementary benefits (EL) and Helplessness allowance (HE)

Source: SESAM

© FSO

17

This figure is based on an additional analysis of SESAM data.

18

63.0% of persons from the age group under consideration live in a couple household, 25.8% in a single person household. Almost three-quarters of persons living in single person households are women.

8

It should also be reiterated here that this analysis is based on the insurance or benefit situation of individual persons, just as the three institutional pillars also have a basically individual character. However, as pensioners live at least for the most part in couple households, the mutual financial protection from husband and wife should not be ignored.

Women

Source: SESAM

1

The figures show that the insurance situation of the Swiss population is very good. In 2008, more than 90% of employees and at least 70% of self-employed persons were insured by at least two of the three pillars. How much these insurances actually pay in pensions depends once again on the individual’s employment history and the level of his or her income. Whereas persons taking early retirement prefer to finance this by the 2nd pillar, for pensioners the AHV/AVS is an important basis that in more than 70% of cases is supplemented by at least one other pillar.

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This article answers these questions based on the results of the SILC (Statistics on Income and Living Conditions) survey. SILC is a survey coordinated by Eurostat at the European level. It covers important issues relating to living conditions, including the financial and material situation as well as subjective assessments. The SILC survey only takes account of people living in private households. Therefore, elderly people living in a nursing home are not taken into account.

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Substantial drop in income in retirement but no increase in material deprivation

What factors influence the risk of poverty and material deprivation rate among older people?

Income falls sharply after age 65. The median annual equivalised disposable income of people aged 65 or over (CHF 44,000) is more than CH 10,000 lower than that of people aged 50 to 64 (CHF 56,200). The median equivalised disposable income falls even lower among people aged 75 or over, to CHF 38,000. The equivalised disposable income is calculated by deducting from the income the social insurance contributions, taxes, basic health insurance premiums and transfers to other households and dividing the remainder by the equivalent size of the household19.

The factors that most strongly influence the income and living conditions of older people are nationality, educational level and living alone or with a partner.

This decrease in income among retirement-age people increases the risk of monetary poverty for people aged 60 or older in Switzerland. People aged 65 or over are twice as likely to be at risk of poverty than people aged 50–64 (23% against 10%). In contrast, elderly people are the least materially deprived20. They are 3 times less likely to suffer from material deprivation than young people under the age of 18. 9% of people under 18 are materially deprived, compared with only 3% of people aged 65 to 74. This rate falls to 2.1% for those aged 75 and over. In other words, a very small proportion of older people have to make do without certain goods because of insufficient financial resources. This does not mean, however, that they necessarily own the goods in question. For example, 28% of people aged 65 or over live in a household without car (compared with 11% of people aged 18 to 64) but only 14% of them give up car ownership for financial reasons.

Risk of poverty, material deprivation and median equivalised disposable income by age group, 2010

G 10

30%

60 000

25%

50 000

20%

40 000

15%

30 000

10%

20 000

5%

10 000

0%

0 Aged 0–17

Aged 18–24

Aged 25–49

Aged 50–64

Aged 65–74

Aged 75 or over

At risk of poverty rate Material deprivation rate Median equivalised disposable income (right axe) Source: FSO, Statistics on Income and Living Conditions, SILC-2010, version 30.11.11, taking the imputed rent into account.

© FSO

The equivalence scale is obtained by assigning a weighting of 1.0 to the oldest person living in the household, a weighting of 0.5 to every other person aged 14 or over and of 0.3 to each child under 14 years and adding up the assigned values. The aim is to take account of the fact that a family of four, for example, does not have to spend four times more than a single person to have the same standard of living (economies of scale).

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The people aged 65 or over who are most at risk of poverty are foreign nationals (34% compared with 22% of Swiss nationals in this age group), people with no education beyond compulsory schooling (33% compared with 14% among people with tertiary level education) and people living alone (29% compared with 21% of people living as a couple). Moreover, older people living in a rural commune are more at risk of poverty than older people living in a town or conurbation (30% against 21%). Remaining professionally active beyond age 64 (8%) can halve older people’s risk of monetary poverty (9.1% against 23.6%). Neither nationality nor the level of education leads to statistically significant differences as far as material deprivation is concerned. The only observed difference concerns people living alone who are at greater risk of material deprivation than people living with a partner (5.1% against 1.5%). The results are more varied for some types of material deprivation, particularly the financial capacity to face an unexpected expense of CHF 2000. Some 30% of foreign nationals aged 65 or over cannot afford such an expense, compared with 11% of Swiss nationals in the same age group. A low level of education and living alone also markedly decreases a person’s capacity to face an unexpected expense. 20% of older people with no education beyond compulsory schooling lack the means to meet an unexpected expense of CHF 2000, compared with 8% of older people with a tertiary-level education. This also applies to 19% of older people living alone, compared with 10% of those living with a partner.

Accumulated personal wealth plays an important role in the living conditions of older people The financial situation of older people depends greatly on their level of accumulated savings. In fact, 18% of people aged 65 or over use up their accumulated assets to pay for daily expenses (compared with 5% of people aged 18–64 and 7.4% of people aged 50–64). However, the use of accumulated wealth is not taken account of in equivalised disposable income. A low level of total wealth (less than CHF 30,000) has major consequences for the living conditions of older people. 11% of people aged 65 or over are affected. Among people with a low level of total wealth, the material deprivation rate is 10%, compared with 3% among people with a higher level of wealth. Almost one out of two older persons (48%) with a low level of wealth cannot face an unexpected expense of CHF 2000 and one quarter (26%) of them cannot afford one week annual holiday away from home.

The following nine types of deprivation, whose observation is coordinated at the European level, are taken into consideration: capacity to face an unexpected expense of CHF 2000; capacity to afford one week annual holiday away from home; lack of arrears of payment; capacity to afford a meal with meat, chicken or fish (or vegetarian equivalent) every second day; capacity to to keep home adequately warm; to have a washing machine; to have a colour TV; to have a telephone; to have a personal car.

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The situation of older people in Switzerland compared to the other European countries

8 out of 10 older people say they are very satisfied with life in general.

Whereas the risk of poverty of 18–64-year-olds in Switzerland (11.2%) is below the European average (15.3%), the risk of poverty of people aged 65 or over is markedly higher in Switzerland (27.4%) than the European average (15.9%). This means that compared with working-age people and without taking account of private wealth, older people are at higher risk of poverty in Switzerland than in most European countries.

As 80% of older people are very satisfied with life in general, this age group is one of the most satisfied with their lives. In comparison, 73% of people aged 25 to 49 say that they are very satisfied with life in general.

Nonetheless, the median equivalised disposable income of people aged 65 or over in Switzerland, expressed in purchasing power standard, remains the 3rd highest in Europe after Luxembourg and Norway. What is more, the material deprivation rate of older people in Switzerland is the 4th lowest in Europe, after Luxembourg, Norway and Iceland.

The areas of life in which older people are markedly more satisfied than younger age groups involve personal finances, housing and how much spare time they have. On the other hand, older people are least often satisfied with their state of health.

Percentage of people who are very satisfied with various aspects of their living conditions, by age group, in 2010

G 12

100%

Median annual equivalised disposable income in purchasing power standard, by age group, in European comparison

80%

G 11

60% 40%

Romania

20%

Bulgaria

0%

Latvia Lithuania

Aged 18–24

Estonia Croatia (cand.) Hungary

Aged 25–49

Aged 50–64

Aged 65–74

Aged 75 and over

their life in general

their state of health

their personal financial situation

the amount of free time

their personal relations

Poland Source: FSO, Statistics on Income and Living Conditions, SILC-2010, version 30.11.11, taking the imputed rent into account.

Slovakia Portugal Czech Republic Greece

© FSO

People aged 65 or over who are either at risk of poverty or materially deprived or have a low level of wealth are much less satisfied with life in general. 76% of older people at risk of poverty are very satisfied with their life in general (against 82% of those not at risk of poverty). The share of older people who are very satisfied with their life in general decreases to 71% among those whose level of wealth is the lowest (against 87% among those with the highest level of wealth) and to 43% among those who are materially deprived (against 82% among those who are not materially deprived). Of the various aspects of poverty, material deprivation has the greatest impact on life satisfaction. It should be recalled, however, that the share of people aged 65 or over who are materially deprived is quite low (less than 3%).

Malta Spain Slovenia Denmark Belgium Finland Italy United Kingdom Sweden Germany (incl. former GDR as of 1991) The Netherlands France Austria Iceland Switzerland Norway Luxembourg 0

5,000

10,000

15,000

20,000

25,000

30,000

* Stéphane Fleury, Thomas Christin, Federal Statistical Office

Aged under 65 Aged 65 or over Source: EUROSTAT, ilc_di03 indicateur, version as at 16.01.2012

© FSO

This indicates that even with a significant drop in their financial resources compared with working-age people, older people in Switzerland are among the best-off in Europe in terms of income.

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The household budget of retirement-age people The composition of the household budget changes over the course of a lifetime. The income level, age and household composition influence how much is spent on various expenditure categories. This article examines these influences on households whose members are of retirement age. The results presented here21 are based on figures from the Household Budget Survey (HBS) 2006 to 2008. This survey provides a detailed view of the composition of private household budgets, both on the income and expenditure sides. It also makes it possible to examine the degree to which the two sides are balanced. Household budgets of retirement-age people are partially financed in quite a few cases by using up saved assets for consumption, as is also shown by the results of the SILC survey (see article on page 8). People of retirement age (i.e. 65 and over22) live for the most part (94%) in couple or single-person households, taking into account only those people in this age group who live in private households23. Therefore, the results shown refer exclusively to these two types of households. The same trends in certain age and income groups can often be observed both in couple and single-person households.

How do retirement-age people finance their livelihood? A comparison of gross income shows clearly that households with retirement-age people finance their household budgets mainly with retirement income from the first and second pillars (see also article on page 5). Among single-person households, the first pillar contributes a larger share (just under 48%) of the household budget than among couple households (41%). Among couple households, on the other hand, the second pillar contributes a somewhat larger share.

In retirement age too, earned income from employment represents a non-negligible share of the household budget. This share declines markedly with increasing age, but a breakdown into income groups shows that even from the age of 65, earned income can make a considerable contribution to a household’s financial situation. This includes sideline jobs and occupations and even non-monetary income in the form of produce from private garden plots. Lastly, remittances and financial assistance from other private households can also contribute to financing the household budget. On average, these account for approximately 2% of income among single-person households aged 65 or over.

If the shares of the source of income are considered as a function of income levels24, the higher the income, the lower the contribution to the household budget made by the first pillar and the higher that made by the second pillar. Another source of income is property income (aka investment income or asset income), whose share rises visibly even before retirement age as household members become older. Property income includes interest and dividend payments, third pillar income, as well as income from rents and leases. As with secondpillar pensions, households with a higher income have a higher share of property income.

All the results shown here in graphic form can be downloaded from the FSO website (www.bfs.admin.ch/bfs/portal/en/index.html) in the form of Excel tables. The results are found under topic ”20 – Economic and social situation of the population | Income, Consumption and Assets | Data, Indicators“

21

Couple households are classified into age groups based on the age of the reference person. The reference person is the person who contributes most to household income.

22

Collective households such as retirement and nursing homes are not part of the sample of the household budget survey.

23

The income groups (1.Q to 5.Q) are based on the quintiles of the income group distribution.

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What accounts for the bulk of expenditures? Among retirement-age households, as in all private households, expenditure on housing and energy is the largest item in the household budget. This includes rent and associated costs ­(particularly heating and electricity costs), as well as mortgage payments and other regular expenses (e.g. building caretaker costs). It does not include mortgage refinancing payments or major repair work on residential property. Besides expenditures on the primary residence, any expenditures on secondary residences are also counted as housing expenditures. In single-person households of retirement age, housing expenditures, which amount to approximately CHF 1120 per month, account for almost 26% of gross income. This is slightly lower than the average monthly amount (about CHF 1240) paid for housing by single-person households of working age (i.e. under age 65). Among couple households of retirement age, the absolute amount (CHF 1230) is not much higher. But due to their higher average gross income, this accounts for a markedly smaller share of the budget (approximately 16%). In the area of food consumption, as people become older, their expenditure on restaurants and hotels decreases while the share of household expenditure on food from the retail sector increases. Single-person households of retirement age spend, on average, about CHF 210 per month on restaurants and hotels. In comparison, single-person households in the youngest age groups (up to age 35) spend almost CHF 475 per month on restaurants and hotels. Expenditures in this area correlate with the level of income. For example, single-person households aged 65 or over in the highest income group spend more than three times more (CHF 400 per month) than those in the lowest income group (approximately CHF 125 per month). The differences are not nearly as pronounced with respect to expenditures on retail-sector food. A similar ratio is seen in expenditure on clothing and shoes, for which high-income households spend more than three times more (CHF 140 per month) than low-income households (CHF 41). A significantly larger proportion of couple households own their homes. During working age (i.e. before age 65) this share increases steadily among all types of household. From retirement age (i.e. from age 65) a slight decrease can be observed. The income level also has a noticeable effect on the ownership rate. Thus, whereas in the lowest income group just under 47% of all couple households aged 65 or over are home owners, in the highest income group the share is 78%. Differences in spending behaviour are also evident in other expenditure categories. Selected examples are given below by way of illustration25.

25

What can be observed among single-person households also applies to couple households. Generally speaking, the amounts in these three categories are about twice as high in couple households. This indicates that in the category of food and clothing there are no noticeable economies of scale between single-person and couple households. In other areas (particularly in the housing expenditures cited above), such economies of scale are certainly observable. In those areas, couple households spend markedly less than twice as much as single-person households on housing. Further differences are observable in the areas of transport, communication and ”entertainment, recreation and culture“.

Complete tables with all numbers are available on the FSO website.

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The income level has an appreciable influence on the computer ownership rate. The share of single-person households (age 65 or over) is 18% in the lowest income group, compared with 50% in the highest income group. Similar differences can be observed in spending on ”entertainment, recreation and culture“. Whereas single-person households aged 65 or over in the lowest income group spend just under CHF 190 per month on this expenditure category, those in the highest income group spend a little over CHF 600. In the area of communication, the differences are markedly less pronounced both with respect to age groups and income groups. Thus, the lowest-income single-person households (aged 65 or over) spend somewhat less on this expenditure category (CHF 66) than the highest-income households (CHF 106). But the difference is somewhat smaller than for expenditures on transport and ”entertainment, recreation and culture“.

In all three areas, the amounts spent for these purposes decrease with age. This decrease is very clear in the age groups 55–64, 65–74 and 75+ in particular. For example, whereas ­single-person households aged 55 to 64 still spend about CHF 430 per month on transport, households aged 65–74 only spend about CHF 280 and those aged 75 or over only CHF 190.

The spending patterns observed among single-person households are also found among couple households. The three examined expenditure categories show different economies of scale: Whereas couple households aged 65 or over spend more than twice as much on transport (CHF 560 per month) as single-person households in the same age group (CHF 235 per month), the expenditure differential is somewhat smaller in the category of communication: couple households spend CHF 112 and single-person households CHF 80 per month.

The same trend is evident when looking at the equipment of households with transport and communication consumer goods.

In the equipment with consumer goods in particular there are striking differences between single-person households of retirement age and couple households in the same age group.

There is a marked drop in car ownership from age 65: Whereas only 35% of single-person households aged 75 or over own a car, 66% of working-age households (up to age 64) have one. The differences in computer ownership are even more striking. Whereas 17% of single-person households aged 75 or over and 39% of those aged 65 to 74 own a computer, the average share among single-person households of working-age (up to age 64) is 83%. NEWSLETTER

For example, the share of couple households aged 65 or over with a computer and mobile phone is markedly higher than that of single-person households in the same age group: Whereas 57% of couple households aged 65 or over own a computer, only 27% of single-person households in that age group have one. Car ownership is also markedly higher among couple households of retirement age than among single-person households in that age group.

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Saving in old-age The simultaneous, detailed and consistent collection of data on income and expenditures makes it possible, by subtracting monthly amounts, to estimate the average amount of savings that households can make. With the indirect method, the accuracy of these estimates is not particularly high, as the confidence intervals show. Inferences and particularly relative comparisons between different households can be made nevertheless.

Whereas households with people of retirement age (aged 65 or over) have average savings of close to zero, working-age households (up to age 64) have positive savings on average. There are marked differences in the amounts of savings. There is a particularly strong correlation with the income group. Lowincome single-person households aged 65 years or older have a negative savings amount. For retirement-age households a negative savings amount does not necessarily mean that they are in a debt situation. It is more likely to be a case of intentional asset depletion. In contrast, the savings amount in the highest income group (CHF 1200 per month) is clearly on the plus side. Such households can continue to put away savings during retirement. Overall, the results presented here show that the consumer behaviour of the retirement-age population is not fundamentally different from that of the working-age population. In certain areas such as transport there are marked differences between age groups, but in other areas the differences are less pronounced or not even significant. Moreover, an observation of the differences by income level shows that among retirementage households as well, the financial situation has a palpable influence on the structure and composition of the household budget.

* Ueli Oetliker, Federal Statistical Office

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For further information on active ageing Here are some internet links on the topic of active ageing: – A brochure from the European Commission, the Committee of the Regions and AGE Platform Europe presents the varying forms of support provided by the European Union to local and regional bodies in the promotion of active ageing. In ­January this year, Eurostat published an article on the employment rate of older people in 2010. – The internet site http://blog.intergeneration.ch/fr/categories/generationenjahr-2012 supplies information on events in Switzerland on the topic. – All news and workshops regarding relationships between the generations can be found online at The Swiss Academy of Humanities and Social Sciences.

Imprint Three editions of the Demos Newsletter will be published in 2012. This newsletter presents news from Swiss statistics, in particular concerning our country’s demography. You can subscribe free of charge to the newsletter or download it from our statistics portal. www.bfs.admin.ch  Topics  Population  Look it up  Newsletter Order number: 1235-1202-05 Production and further information: Federal Statistical Office, FSO, Demography and Migration Section, tel: 032 713 67 11 Email: info.dem@bfs.admin.ch Editor: Fabienne Rausa, FSO Editorial staff: Thomas Christin, FSO, Stéphane Fleury, FSO, Olivia Huguenin, FSO; Thierry Murier, FSO; Ueli Oetliker, FSO, Fabienne Rausa, FSO. Graphics and layout: FSO Prepress / Print Service Original texts: German, French Translation: FSO Language Services Front page: FSO; concept: Netthoevel & Gaberthüel, Bienne; photo: © Federal Chancellery – Béatrice Devènes, Dominic Büttner

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demos. Active ageing (2)