Social security and social insurance are important facets of governance of any country. A progressive social security and insurance system helps the government to reduce the risk of economic distress as the citizens have sufficient emergency funds. This paper will adeptly discuss the social security and insurance system of Switzerland and analyze its expenditure, population, health coverage, and reforms.
Switzerland is one of the most progressive countries in the world. The World Economic Forum ranked the Switzerland as the most competitive economy in the world from 2008-2014 beating all other progressive economies such as the United States, Singapore e, United Kingdom, and other European countries (Cadman, Online).
The Federal Social Insurance of Switzerland noted that it provides social security and insurance in five areas namely: old age, survivors and invalidity’s insurance, accidents and illnesses protection/coverage, maternity and service income compensation allowances, insurance for sudden unemployment, and allowances for families (Federal Social Insurance of Switzerland, Online).
The government of Switzerland collected a total of CHF 807 billion social revenues excluding capital value changes. It allocated bulk of the social security and insurance funds for old age cash benefits accounting for 52.6 percent of the total revenue , then health (21.1 percent), invalidity cash benefits (9.3 percent), family cash benefits including maternity compensation (4.9 percent), and cash benefits for surviving dependents (4.5 percent) (Federal Social Insurance of Switzerland 2015, Online).
Other benefits include unemployment cash benefits with 4.3 percent allocation, income compensation in the case of accidents (1.4 percent), employment measure (1.1 percent), income compensation allowances in case of service (1.4 percent), services for the disabled (.1 percent), and services for the elderly (.1 percent) (Federal Social Insurance of Switzerland, Online).
The same source also noted that, between, the governments of Switzerland allocated funds for social insurance benefits at a rate ranges from 14 percent to 23 percent of the GDP for the period of 1990-2015. The record low was 14 percent in 1990 while the record high is 23 percent of GDP in 2005. Switzerland’s social insurance’s pie of GDP in 2015 is estimated at 22 percent (Federal Social Insurance of Switzerland, Online).
The social security insurance is paid by both the government and the private sector. A document from Organization for Economic Co-operation and Development (OECD) in November 2014 ranked the Switzerland as the country with the highest Private Pension Benefit in the world, spending about 6 percent of its GDP in 2011, and second highest spender in the world in terms of sickness and disability-related benefits accounting for 1 percent of its GDP. The government of the Switzerland spent .8 percent of its GDP for social cash benefits, ranking 17th highest among all countries (OECD, Online).
According to the website of Trading Economics, Switzerland’s social security rate for employees reached 6.25 percent in 2014. It had an average of 6.22 percent from 2000-2014 and registered a record low of 6.05 percent in 2004 and a record high of 6.55 percent in 2001 (Trading Economics, Online).
Data from the World Bank revealed that Switzerland’s dependency ratio has been declining annually by 1 percent from 2010-2013. The dependency ratio in 2013 reached 70, a 3 percent decline from the registered 73 per cent in 2010. World Bank defines the dependency ratio as the ratio of non-working population (ages 15 and below and 65 and above) over the working population (ages 16-64) (The World Bank, Online). There has been no information obtained about the country’s income distribution among the aged population.
. World Bank’s data on Dependency Ratio of Switzerland
The HSBC Switzerland document in 2014 revealed that the social security contribution rate is 10.3 percent of the monthly salary and 5.5 percent of it is contributed by the employee. The employee will also contribute 1-2.2 percent of his annual salary depending on his income for the unemployment insurance. The employer pays 50 percent of pension premium (HSBC, Online). The social benefits received are taxable. However, there was no information obtained about the tax rates of the social benefit income.
The website of the US Social Security Administration Office of Retirement and Disability revealed that based on the Switzerland’s law of 1946, 1959, 1982, and 2000, the mandatory retirement age of men is 65 while the retirement age of women is 64. There are prerequisites, eligibility for the benefits. The government of Switzerland requires its citizens to contribute to social security starting age 21 each year to have full pension benefit during old age. To obtain a partial pension benefit, one must have at least one year of contribution. Pensions can be obtained even in the overseas regardless of nationality (US Social Security Administration, Online).
The Switzerland’s law also mandates benefits involving family relations. The disability pensions provide for dependents’ supplement in which 40 percent of the insured’s pension is paid to child younger than 18 or 25 if the child is a student. The orphans have benefit of CHF456-CHF912 under survivor’s benefit. The amount can be adjusted every two years depending on wages and prices. A lump sum is also provided for the widow after a death of a survivor. The benefits of family allowances provide for CHF 200 for each child 16 years and CHF 220 for each child living in mountainous areas, birth grants of CHF 850-CHF 2000, vocational training allowance of CHF 250 for each child, and household allowance of CHF 100 for married couples (US Social Security Administration, Online).
The unemployment insurance benefits program of Switzerland provides for 80 percent of the insured earnings and 70 percent if the beneficiary has no dependent. It also grant exceeding CHF 140 daily benefit paid up to 260 days for people who are not assessed according to contribution, 400 days for people with at least 12 months of contributions, 520 days if age 55 or older with at least 18 months of contribution. The program also provide for 80 percent of a person’s lost earnings paid up to 12 months in a two year reduced working hours, People with reduced working hours due to weather conditions also enjoy such benefit up to six months (US Social Security Administration, Online).
The healthcare benefits of Switzerland include sickness and maternity benefits, worker’s medical benefits, dependent’s medical benefits, Switzerland provide for daily allowance at an amount agreed by the insured and insured. The daily sickness allowance can be paid 720-900 consecutive days while the maternity benefit is paid for 14 weeks after the childbirth at an amount 80 percent of the last daily earnings or up to CHF 196. For maternity care, concerned individuals do not have to share costs (US Social Security Administration, Online).
The workers’ medical benefit provide no limit up to what number of days that the concern individual can enjoy his/her benefits. However the patient pays CHF 300 and 10 percent of his/her total cost in a year of medical condition. Such method of benefit is called cost-sharing. The dependents of the workers are also eligible for cost-sharing benefits and are sometimes provided through complementary insurance (US Social Security Administration, Online).
People with temporary disability receive 80 percent of the insured’s most recent daily earnings up to maximum of CHF346. It is paid after 3 days until recovery or the benefits can be adjusted once the patient submitted a certification of permanent disability (US Social Security Administration , Online).
The permanent disability benefits provide for 80 percent of the daily earnings up to maximum of CHF10,400 monthly allowance plus family allowance. The person with permanent disability can receive two to six times of the maximum monthly allowance is he or she needs constant attendance and depending on the degree or severance of the disability (US Social Security Administration, Online).
Switzerland has pending social benefits reform which is the Pension Reform of 2020 which will put pressure for the employers for insurance payments as there will be much aged population by the year 2020. The reform will prevent the country from having potential annual deficit of CHF 8 billion-10 billion (EPP, Online). The country is facing social security challenges such as increasing health costs and demographic shifts or aging population which place pressure on households and government finances (Portwich, Online). In addition, there are also unavoidable issues in terms of claims which the private and public sector tries to resolve.
Overall, Switzerland’s social security system is excellent in terms of the amount and the areas of benefits. The Swiss government is able to forecast the potential future problems of the country’s social security to anticipate and resolve it before it can even occur. The Pension Reform of 2020 bill is already in review by the Congress by the end of 2014. The government is expecting for its immediate approval and implementation.
With the cooperation of the private and government in the social security system of the country and early projections of challenges, it is very possible that all potential problems can be addressed and prevented. As a result, we can maintain a positive outlook in the country’s social security system and expect it to continue to be strong, beneficial, and generous to the citizens.
The social security and insurance system of Switzerland is very impressive. It is a reflection of its economy, being dubbed as the world’s most competitive economy. It can serve as a model to other countries. The government’s ability to project future problems makes it well-prepared to any uncertain or unpleasant economic scenario. Thus, its social and economic system remained stable will continue to be one for the next decades. It is only for the next generation of leaders to continue such good management of the country so they can continue enjoy their economic status for a longer time. One of the policies that can help this is encouraging leadership trainings and procreation to increase younger and more productive population in the next generation.
Works Cited Page
Key data / Statistics. Federal Social Insurance Office, Switzerland. Web. 2014. http://www.bsv.admin.ch/themen/ueberblick/00004/index.html?lang=en
Age dependency ratio (% of working-age population). The World Bank, Web. 2014. http://data.worldbank.org/indicator/SP.POP.DPND
Worldwide personal tax guide 2013 – 2014. HSBC. Web. 2014 https://www.expat.hsbc.com/1/PA_ES_Content_Mgmt/content/hsbc_expat/pdf/en/global_tax_navigator/switzerland.pdf
Social Security Programs Throughout the World: Europe, 2010. US Social Security Administration, Office of Retirement and Disability Benefit. Web. 2011 http://www.ssa.gov/policy/docs/progdesc/ssptw/2010-2011/europe/switzerland.html
Social security in Switzerland. Federal Social Insurance Office, Switzerland. Web. 2015. http://www.bsv.admin.ch/themen/ueberblick/00003/index.html?lang=en
Social spending is falling in some countries, but in many others it remains at historically high levels. OECD. Web. 2014. http://www.oecd.org/els/soc/OECD2014-Social-Expenditure-Update-Nov2014-8pages.pdf
Cadman, Emily. Switzerland named as the World’s most competitive economy. Web. 2014 http://www.ft.com/cms/s/0/1fea500a-32ba-11e4-93c6-00144feabdc0.html
Switzerland Social Security Rate For Employees. Trading Economics. Web. 2015. http://www.tradingeconomics.com/switzerland/social-security-rate-for-employees
Epp, Verena Parzer. A total package to prevent tactical manoeuvring. Avenir Suisse. Web. 2014 http://www.avenir-suisse.ch/en/36621/a-total-package-to-prevent-tactical-manoeuvring/
Portwich, Philipp. he Swiss Social Insurance System: Social Security and Grass-Roots Democracy. Social Science Research. Web. 2011. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1735317