infonet-economy

This chapter takes Switzerland’s much praised three-pillar system to illustrate some of the challenges reforms to pension systems face in an aging society. It shows that policymakers are confronted by some individuals with behavioral anomalies and by others who strategically exploit the system. The trade-off between providing incentives and adequate retirement income limits policy options, especially if reformers do not want to impose too many restrictions on individual choice and wish to avoid excessive burdens on the young generation. Pension reforms can also be seriously challenged by political constraints, in particular, when voters have a direct say on proposed changes.