Deep gender and cultural divide in relation to raising the retirement age for women to 65

Introduction: Three influential factors

Last year, Switzerland’s Old Age, Dependents and Disability Pension Scheme (AHV) turned 70 years old. Few people saw this as a cause for celebration. Nonetheless, the AHV is still regarded as one of Switzerland’s most important social achievements. In view of demographic developments, however, a major financial problem is brewing. When AHV was introduced, each person in retirement was financed on average by almost seven contributors, but today this ratio is only 3:1. ¹

Without sweeping reforms, AHV cannot be financed in the long term. The situation facing occupational pensions (BVG) is similarly dramatic, although at first glance the financial problem is not as serious, since occupational pension schemes are financed through funded capital.²

If they wish to place pensions provision on a secure footing, politicians are faced with three options: they can increase contributions, reduce expenditure, or raise the retirement age.

A solution is almost impossible without a higher retirement age

At least one of these three options must be pursued to ensure that the provision of pensions continues to be financed. In recent decades, a number of small increases in contributions have been made to address the financial shortfall, in the short term at least. However, since almost every increase in contributions involves a further redistribution of wealth from younger to older citizens, changes at this level are meeting increased resistance. In political terms, there is limited room for manoeuvre on spending cuts. Thus, increasing the retirement age seems almost inevitable as part of the longer-term solution. There is no other way to restructure pensions provision.³

Two official proposals are already on the table. The Federal Council is planning a reform (AHV 21), which includes among other things raising the retirement age for women from 64 to 65.⁴ And the Young Liberals of Switzerland recently launched an initiative that envisages an initial increase in the retirement age to 66 in two-monthly increments, followed by a linking of retirement age to life expectancy.⁵

Voting patterns among 50 to 70-year-olds will play a decisive role in the success of such proposals. At 36% of the voting population, they represent not only the largest age group of voters, but also have an above-average voter turnout at elections. In the most recent referendum, this was 48%, while voter turnout for 30 to 49-year-olds was 36% and for those under 30 only 27%.⁶

In order to get a better picture of the attitudes of this age group, in June 2019 Deloitte Switzerland conducted a representative online survey of 1,000 Swiss residents between the ages of 50 and 70, broken down according to age, gender and region.⁷

Unpopular pension age increases

An increase in the official retirement age for women from 64 to 65 was favoured by 47% of respondents to the survey (see Figure 1). The approval rating for this move among the 50 to 70 age bracket is lower than among younger age groups, since  previous surveys have shown that a substantial majority of all voters favours an increase in the retirement age for women from 64 to 65.⁸

Approval for an increase in the retirement age for men to 66 is much lower. Under a third of 50-70 year olds would support such a move and the approval rating for an increase in the retirement age to 66 for both men and women is equally low. Support for a gradual increase in retirement age to 67 for both men and women is even lower. The proposal to link retirement age to life expectancy is favoured by just 28% of respondents.

Approval ratings tend to be in inverse proportion to the degree to which people feel affected

The difference in approval ratings between  age groups is less surprising. For younger voters, their retirement date is decades in the future, while older people would be directly affected by a change in retirement age, unless they are already retired.

The relevance of personal impact is also evident in the different responses from pensioners and workers aged between 50 and 70. Support for an increase in the retirement age for women to 65 is ten percentage points higher among pensioners than among those still in employment, mainly due to the fact that pensioners would not be affected.. A similar difference between workers and pensioners is also evident with the other proposed retirement age reforms.

Scepticism among women

However, the difference between the genders is the most marked. While 60% of men between the ages of 50 and 70 support or strongly support an increase in the female retirement age from 64 to 65, the rate of approval among women in the same age bracket is just 32%. Here too direct impact may be a major cause of difference.

However, this is probably not the only reason. The survey found that approval among men for raising the retirement age is higher than among women, even if only men were to be affected by the increase (see Figure 2). Although support among men drops to 35% in this case, it is still five percentage points higher than for women. On the other hand, support among women never exceeds 32%, irrespective of which gender group would be impacted by the retirement age increase.

Broad rejection in French-speaking Switzerland

A regional breakdown also indicates big differences between regions. As can be seen in Figure 3, there is a deep divide between German-speaking and French-speaking Switzerland. Only 24% of 50 to 70 year-olds in French-speaking Switzerland favour an increase in the official retirement age for women to 65. In German-speaking Switzerland the approval rating in the same age bracket is more than twice as high. The differences are similar, if not quite as pronounced, with regard to the other proposals for raising the retirement age.

When it comes to social policy, the divide between the German-speaking Swiss and their French-speaking counterparts is unmistakable. This is also evident in the voting behaviour of the electorate in previous votes on pensions provision and attempts to reform pension finances.⁹ While the German-speaking Swiss are generally more concerned about the sustainability of pension provisions, the population of French-speaking Switzerland tend to expect more benefits from the state. In summary: the population of western Switzerland has a different relationship with the state. Hence the fact that approval ratings for a rise in the retirement age are divided along cultural lines. What is surprising, however, is the extent of the difference.

Conclusion: We need to look at Canada and Sweden

It may be difficult to restructure pensions provision completely without increasing the retirement age. As the survey shows, the 50 to 70 age group regards any such move with scepticism. At present, only the proposal to raise the retirement age for women from 64 to 65 looks like having any prospect for approval among voters. However, raising the retirement age for women is unlikely to be sufficient for a long-term solution to the financing problem. In addition, the Federal Council’s proposed reform (AHV 21), which envisages not only raising the female retirement age to 65 but also generating additional income through higher wages, VAT contributions and federal subsidies, can only sustain the AHV financially until 2028. As calculations published by the Federal Council show, the AHV would slip back into the red as early as 2029.¹⁰ 

To see how restructured pension provisions could be made secure in the long term, it is worth taking a look at Sweden and Canada. Both countries linked a rise in retirement age to a wide-ranging increase in flexibility. Both decided against fixed age limits for retirement. In Sweden, anyone aged between 61 and 67 can decide for themselves when to retire (from 2020, this age range will be raised to between 62 and 68). The longer you work, the higher your pension. This is measured against average life expectancy.

Canada has abolished a retirement age. Every worker can decide for himself or herself when to retire. Here too the principle is that the longer you work, the higher your pension. The age of 65 is simply intended as a reference point for calculating pension insurance payments. Abolishing the fixed age limit makes retirement from working life a much more personal and flexible decision.

Instead of focusing exclusively on raising the retirement age, Swiss policymakers could introduce broader flexibility. Instead of a mandatory retirement age, for example, a 60 to 70 age range could be introduced, with pension payments  linked to average life expectancy. The sooner a person retires, the lower the pension (and vice versa).

This would have two major advantages.  First, the age-related cut-off point that many people currently recognize would disappear. These days most people think that people should work until 64 or 65, then it’s time to stop. Many business people share this view: when an employee reaches mandatory retirement age, he or she is expected to leave the company. A flexible retirement age would change this outlook, and would increase incentives to employ older people. At the same time, there would be a greater incentive for employees to work for longer, to earn a larger pension.

Secondly, such a system is likely to win greater acceptance politically and become more popular among the 50-70 age group. The powerful trade union Angestellte Schweiz recently called for the fixed retirement age to be abolished, and for increased flexibility linked to life expectancy.¹¹