What impact will the ageing of the population have on Switzerland s future?

Transcription

1 What impact will the ageing of the population have on Switzerland s future? Raymond Kohli, Dr sc. math., Demography and Migration, FSO Jacqueline Kucera, Dr ès sc., MPA, Demography and Migration, FSO

2 Plan 1. Demographic trends 2. Impact on old-age pension schemes 3. Population projection model 2

3 1. Demographic trends 3 Viele Menschen an einem Strassenfest in Zürich (Archiv) Keystone

4 1.1 Demography Demography is the quantitative study of populations, of their characteristics and their evolution depending on fertility, mortality, migration, marriage rates and other factors. 4

5 1.2 Population trends Population in Switzerland in ,000,000 million in Switzerland 1.58,000,000 million persons aged 65 and older (of whom ) 4.8 million economically active persons (4.1m FTE) 7,000,000 Growth in the permanent resident population 8,327,126 Resident population 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000, Sources: FSO, FSIO, SECO

6 1.3 Life expectancy Number of expected years of life At birth Men Women At age 65 Men Women At age 80 Men Women Source: FSO,

7 1.4 Babyboom ,000 Live births and deaths in Switzerland, ,000 80,000 60,000 40,000 20, deaths live births 7 Quelle: BFS, BEVNAT

8 1.5 Demographic Ageing 1/3 Number of births , , ,000 80,000 60,000 40,000 20,

9 1.5 Demographic ageing 2/3 140, , ,000 80,000 60,000 40,000 20,000 Number of 65 year old men and women Generation

10 1.5 Demographic Ageing 3/3 140, , ,000 80,000 60,000 40,000 20,000 Comparison between births and the 65 year old persons Generationen 10

11 1.6 Population growth Annual growth of the permanent resident population aged 65 and older according to the reference scenario 50 In thousands Observations Reference scenario A Source: FSO, BEVNAT, SCENARIO 11

12 1.7 Population growth of , ,000 Growth of population aged 65 or older Observations Reference scenario A , , , , Source: FSO, BEVNAT

13 1.8 More and more pensioners Persons aged 65+ living in Switzerland 2015: 1.5 million 2045: 2.7 million New pensioners per year Between 2021 and 2035: more than new pensioners/year Between 2026 and 2035: more than with in Percentage of old people (65+) in the population Increase from 18% to 26.4% in 30 years The number of people aged 80 and older will double 2015: : 1.1 million 13 Source: FSO, SCENARIO

14 1.9 Number of AVS/AHV pensions ~ 5 million economically active persons contributing to the AVS/AHV in 2015 ~ 2.2 million AVS/AHV pensions in 2015 / ~ 2.3 million in Sources: FSO, FSIO, SECO

15 1.10 Persons of working age/pensioner people of working age people of working age 2.3 people of working age Raymond Kohli, Dr sc. math. and Jacqueline Kucera, Dr ès sc., MPA, Demography and Migration Section, 15FSO 15 Source: STATPOP, SCENARIO

16 2. Impact on old-age pension schemes On 25th September 2016 the Swiss people voted about the AVSplus initiative. AVS/AHVplus aims to secure and reinforce the old age provision. AVS/AHVplus aims to rise the AVS pension by 10 percent. The popular votation has been rejected. 16 Source:

17 2.1 AVS/AHV facts In 2015, and for the first time in its history, the AVS/AHV expenditure was greater than its revenue. Pensioners are living longer, leading to an extension of the period in which pensions are paid. As the baby-boom generation reaches retirement age, the number of pensions is increasing rapidly And as young people are entering the labour market later, revenue is decreasing. In short, the number of AVS/AHV pensioners will increase and that of workers paying contributions will decline. The AVS/AHV has a structural problem that will get worse over the years, causing a loss of ~CHF 7bn by

18 2.2 AVS/AHV funding AVS/AHV Revenue 41,2 bn. 42,97 bn. Employee-employer contributions 30,4 bn. 30,9 bn. Confederation s contribution (19.55% of expenditure) (Including tobacco and alcohol taxes) 8,2 bn. 8,3 bn. VAT 2,6 bn. 2,6 bn. Casinos, others 0,03 bn. 1,2 bn. Expenditure 41,7 bn. 42,5 bn. Pensions, benefits 41,5 bn. 42,3 bn. Administration 0,2 bn. 0,2 bn. AVS/AHV fund (reserve ~1 year) 44,2 bn. 44,7 bn. 18 Source: FSIO, SVS, 2015, 2016

19 2.3 AVS/AHV expenditure 2015 to 2030 AVS/AHV expenditure will rise considerably 2015: CHF 42 billion 2030: CHF 60 billion In 2030 the expenditure deficit will be ~CHF 7 billion, i.e. ~1% of GDP. Without reform, the AVS/AHV fund will have dried up by 2030 (10% of expenditure 6 bn). Source: FSIO,

20 2.4 AVS/AHV funding requirement Revenue (in CHF billion) 41,8 44,7 49,0 53,6 Expenditure (in CHF billion) 42,5 45,6 52,7 60,7 Deficit (in CHF billion) 0,77 0,96 3,77 7,06 AVS/AHV fund (% of expenditure) 105 % 95 % 64 % 10 % Source: FSIO SCENARIO, AHV/AVS funding 20

21 2.5 Financial results and AVS/AHV fund Operating result AVS/AHV Level of AVS/AHV fund ,96 bn. 43 bn ,77 bn. 34 bn ,06 bn. 6 bn ,71 bn. 45 bn. 21 Source: FSIO / AHV/AVS funding in 2016 / June 2016

22 2.6 Funding: what are the risks? Low increase in wages, pensions and contributions Depreciation of financial assets and poor returns Long-term unemployment, decline in employment decrease in revenue Increase in insurance contributions when the basis for calculating contributions is reduced? 22

23 2.7 What are the scenarios for the State? Does this trend towards a deficit in old-age pensions run counter to the debt constraint? AVS/AHV safety net: what measures? Increase of the retirement age of women to 65 from 2021? VAT should be increased by 0.6 percentage points? Increase of contributions to the AVS/AHV by 0,3 percentage points? Contribution of the Swiss Confederation of 19,55 %?... if the measures proposed by the Prévoyance vieillesse 2020 reform are unable to cover expenditure? 23

24 3. Model Hypotheses Calculations Results 24

25 3.1 The component method Population at the start of the period Emigrations* Immigrations* Population at the end of the period Women years Deaths Births *Immigrations- emigrations = net migration 25

26 3.2 Hypotheses on demographic indicator trends Average number of children per woman (TFR) Men s life expectancy at birth in years (LE m) Women s life expectancy at birth in years (LE f) Annual average net migration 26

27 3.3 Fertility trends Live births 120, ,000 80,000 60,000 40,000 20,000 Live births Average number of children per woman Average number of children per woman

28 3.4 Mortality trends Deaths 90,000 80,000 70,000 60,000 50,000 40,000 30, Life expectancy at birth 20,000 Deaths 10,000 Life expectancy at birth - Men 10 Life expectancy at birth - Women

29 3.5 Migratory flow trends 200, ,000 Number of migrations 100,000 50, ,000 Immigrations Emigrations Net migration -100,

30 3.6 Conversion of indicators into events Life expectancy => probability of dying* => number of deaths Average number of children per woman => fertility rate* => number of births** Total net migration => net migration at each age => number of migrations** *Probabilities or rates applied to the population by age group and by sex (applied only to women for births) **For both sexes and for each age group (ages of mothers for births) 30

31 3.7 Principle of the scenarios Determining the scenario framework: Hypotheses on social, political, economic and cultural contexts in the future Determining the demographic scenario: Hypotheses on the evolution of demographic components depending on the chosen context Scenarios forecasts* *The demographic changes will only become reality according to a scenario if the hypotheses on the context turn out to be true. 31

32 3.8 How to use the proposed model 1. Select the scenario horizon in the drop-down list 2. Fore each period select the value of the demographic indicators* 3. Calculation of population change => graphics and tables automatically updated *According to the lists of values possible up to the scenario horizon 32

33 3.9 Advantages and limitations of the model Speed Choice of hypotheses Major simplifications (structure by age) Scenario in 5-year steps No differentiation between different groups (e.g.: Swiss/foreign nationals) 33

34 Conclusion Demographic ageing is going to intensify. The risks of low contributions and poor returns could worsen. Economic forecasts foresee stagnation rather than growth. falling revenue. The funding of old-age pensions could worsen. The reform scenarios could provide an answer. 34