Generational Transfers within the Occupational Pension System in Switzerland

Solidarity, a key element of any social security system, can be defined as the total intended redistributions that take place between the existent groups within the system, with the purpose of helping each other. However, unintended redistributions also exist, affecting the fairness of the system and leading to animosities between these groups, in particular between active members and pensioners. Aiming to broaden the discussions on this topic, we identify all sources of transfers pertinent to the Swiss occupational pension system and develop a tractable methodology allowing the pension funds to quantify these transfers. We focus our analysis on transfers existing between active members and pensioners, as such transfers are at the core of many political discussions. We then provide a numerical example, showing that both active members and pensioners benefit from unintended distributions. Our methodology is general enough to be adapted on a case-by-case bases in order to yield a better picture of the situation of each pension fund