Augmented wealth in Switzerland: the influence of pension wealth on wealth inequality

Abstract

Entitlements for social security and occupational pensions present a major wealth component and play a central role for financial security. However, most individual-level data lacks information on pension wealth. By linking various data sources, this contribution estimates the present value of future pension entitlements in Switzerland for statutory pensions, occupational pensions and third pillar accounts and analyses the distribution of augmented wealth, which combines pension wealth and net worth. The CH-SILC survey from 2015 is used to estimate real assets, financial assets and pension wealth of retired individuals. The pension entitlements of non-retired individuals are simulated on the basis of their earning history from administrative records following the accrual method and assuming a real discount rate of 2%. When pension wealth is added to net worth, average wealth doubles, and the Gini-coefficient declines by 26%. The equalising effect is particularly strong for social security pensions. The wealth distribution differs strongly between the three pillars of the pension system; there are also strong differences between gender and age groups. In Switzerland, wealth accumulation continues after retirement age.

The need for improved Australian data on social determinants of health inequities

“…22 However, there are many other examples, such as those that exploit natural experiments in which policies are enacted in some areas, or with some groups, but not simultaneously in others, as in a Scottish study of urban renewal, 23 a New Zealand study capturing the complex interplay between ethnicity, occupation and health, 24 and a Swiss study that estimates the otherwise difficult-to-measure variable, wealth of pensioners. 25 We recommend the establishment of a new, regularly collected, good quality data source on the distribution of health and social determinants of health that can be analysed nationally, in states and territories, and by remoteness (Box 2). This will enable monitoring of social determinants of health inequities in Australia in line with international best practice.…”

“…Evidence from elsewhere shows the potential that is unrealised, with Nordic countries among the international leaders 22 . However, there are many other examples, such as those that exploit natural experiments in which policies are enacted in some areas, or with some groups, but not simultaneously in others, as in a Scottish study of urban renewal, 23 a New Zealand study capturing the complex interplay between ethnicity, occupation and health, 24 and a Swiss study that estimates the otherwise difficult‐to‐measure variable, wealth of pensioners 25 …”

The Inequality of Lifetime Pensions

“…A different relevant line of research on old-age inequality has focused on the net pension wealth of individuals at different ages (Johnson et al 1999;Bönke et al 2019;Kuhn 2020;Olivera 2019). Net pension wealth is the current value of expected future pension flow, including (returns to) individually funded pension funds and benefits from governmental, collective agreement, or employer-linked pension plans, as well as individual savings and funded pension plans.…”

Wealth Concentration in the United States Using an Expanded Measure of Net Worth

“…They find pensions have an equalizing effect on inequality, and to a degree very similar to what we find. In particular, Kuhn (2020) finds a decrease in the Gini coefficient from 0.75 for non-pension wealth to 0.55 when including pension wealth in Switzerland using data from 2015, while Bönke et al (2019) find, in 2012 data, a decrease from 0.79 for non-pension wealth to 0.59 in their measure of augmented wealth in Germany. Although the countries, pension systems, and, to some extent, methodologies differ, we estimate a broadly similar decrease from 0.73 to 0.56 in 1992, and from 0.82 to 0.67 for 2019 data.…”

“…Their estimation approach for SSW and the wealth concept is slightly different from ours here, but they reach similar conclusions about the levels and trends of overall wealth inequality. Notably, outside of the United States, Kuhn (2020) and Bönke et al (2019) examine augmented wealth measures that incorporate pension wealth in Switzerland and Germany, respectively. They find pensions have an equalizing effect on inequality, and to a degree very similar to what we find.…”