No universal pension-provision solution
Any wealth planning process should start with an analysis of the overall asset picture. People's attention is currently focused on employee benefits insurance. According to the Credit Suisse Worry Barometer, 44% of Swiss voters consider retirement provision their main concern, making it society's primary issue. The origins of these concerns are widely known.
Longer life expectancy and the low interest rate environment weigh heavily on the Swiss pension system – a situation that is not reflected in the high technical interest and conversion rates. In addition, early retirement and a generous pension based on today's criteria are incompatible in the long term.
Risk of an unpleasant surprise
If you carry out an in-depth analysis of your pension provision, you will find that it's essential to assess at an early stage what your individual needs will be in the future. Can you meet these needs with your existing assets and future income? Can you meet them even if your second pillar benefits are reduced? Is early retirement possible? Should I draw a pension or a lump sum? One answer quickly becomes clear: There is no universal solution for retirement planning – what matters is your individual situation. It's essential to look ahead. Postponing this thought process until retirement means you could be in for an unpleasant surprise: If you have a pension gap, you will be unable to maintain your accustomed standard of living.
No matter what your personal circumstances are, the following principle applies: Any wealth planning process should start with an analysis of the overall asset picture. In this respect, real estate is of particular importance, because it represents over 40% of household assets in Switzerland. Any shares held in a privately owned company and the income derived from it should also be included. An assessment of risk and return should take into account these real estate assets and any related liabilities. A good third of net assets are tied up in employee benefits insurance. Employed persons should therefore also weigh up whether they need to make additional purchases.
Once these key elements have been taken into account, the question becomes whether to invest disposable assets in the capital markets. With expected returns remaining low, savings accounts and bonds can only be relied on for part of your retirement income. Investments offer opportunities, even for retirees, provided they are aligned with the investor's life stage and consequently have a lower risk profile. We often forget that a large portion of our assets are already invested by pension funds during our work lives. Second pillar capital contributions can be reinvested, for example in a broadly diversified fund that complies with the strict investment guidelines for employee benefits insurance (BVV 2) in Switzerland.
Banks and the Swiss financial center therefore have a natural responsibility that they must accept.
Choosing the ideal partner
Once you have made the decision to focus on your retirement provision, you then need to consider who your ideal partner would be. Banks can be a good choice. First of all, financial advice and pension planning are among the main activities in private banking. In addition, providing a detailed explanation of investment risks with regard to total assets has been part of their core business for years. And new legal framework conditions have further increased due diligence requirements. Good retirement planning starts long before retirement age and places future financial events into a managed framework, thereby ensuring that clients receive multigenerational, needs-based advice through all their life stages.
Integrated wealth and pension planning is becoming increasingly important and is essential for the future of the Swiss economy and for relationships between the different generations. Banks and the Swiss financial center therefore have a natural responsibility that they must accept. At the same time, they also have new opportunities to develop very specific skills and services that set them apart in universal wealth management.