Financial awareness in the society

For starters, they “merged” with (absorbed) a 40-year run-down socialist state (GDR).
Also, more bureaucracy, higher social transfers, generally distributing more money.

If the southern states and economic powerhouses of Bavaria and Baden-Württemberg were to secede from the federal republic, I think they’d be able to compete with Swiss cantons with only minor policy adjustments required (except their tax system with its complexity itself. And they’d have to keep welfare migration at bay).

…except pillar 1 - which happens to be the goverment-run system.

Socialism is burning the money.

2 Likes

They are different topics

  • First one regarding the VAT in the invoices
  • Second related to the transparency on the pension funds

But Pillar 1 is always the same, isn’t it? it’s 23k year and done. It doesn’t matter how much or how less you have worked this money is warranted.

France, Italy and Spain didn’t absorb anything and yet they’re even worse off. I don’t think this is the problem. If anything, this was a chance to give the country a boost. Overtaking a young, educated population, eager to make money. The east was a problem because many people left for the west, you don’t include this in your gain/loss calculation, do you? Moreover, the west has been fueling money into the east, building the infrastructure, making things nicer, but I think first you need businesses and jobs. Giving money means reinforcing a bad pattern.

I don’t see it. The income tax is already paid by the employee. What remains are the contributions, which are partially deducted from the nominal salary, and partially added on top of it.

So let’s say your nominal salary is 6’000. Your social contributions AHV+BVG are 2’000, 1’000 paid by you, 1’000 by the employer. So you receive 5’000, but he has to pay 7’000. If your salary was instead 7’000 and you paid everything yourself, you’re telling me this would have a negative effect on bargaining power when negotiating salary raise? For the employer both scenarios are identical from the cost perspective.

Moreover, as the BVG % rises as you get older, the relative cost for the employer goes up, which is not really visible when simply comparing nominal salary. Again, lack of transparence.

1 Like

Regarding Germany vs Swiss you can not really compare it. Main reason is the population and territory.

As a stupid example as they are quite a lot of IT people. Try to build 10-15 years ago a system that cross the taxes information with your bank accounts… to detect fraud. You can do it easily for 10M but not for 80 and so. The cost are exponential not linear in the majority of the cases

No company or business will go without a proper infrastructure and legal conditions. You need to invest to get the benefits.

If you want to build an IT HUB you need to at least have a fast connection.

Very well, but who had the dibs to benefit from this investment? Were these not the German companies? They were the ones to place their factories and hire their workers in the former DDR. The same happened in Poland. Everybody keeps talking about how much money Poland received from the EU, but European companies also invested their capital in Poland and are constantly reaping the benefits. It’s a win-win for both sides.

And Monaco even lower. It’s a known trick for tax haven, you need a small country to pull it off because you’ll compensate the lower taxes by being attractive. But for a small country they only need to attract a few people/company, while if you’re a 50M+ you’ll never be able to.

Thankfully we’re going towards minimum global tax rate to avoid those kind of issues.

… and then they sign a crappy policy linked 3A :smiley:

I totally agree on that.

Main issue is that a lot of countries does not have a roadmap on where they want to invest and what hubs they want to build.

There are few exceptions in Europe and you see quite success there. They provide the infrastructure and the legal framework to attract certain fields.

The pillar 1 benefits aren’t the same for everyone. They depend on the total AHV income (accounting for inflation and a couple of other things) and vary between CHF 14’340 and CHF 28’680 a year, assuming a single person with no contribution gaps.

You can ask for a statement of your AHV account but you don’t get it automatically.

2 Likes

What @jay wrote: many people think they’ll receive the maximum AHV benefits and plan according to that. Many will actually have to do with lower benefits. I may not reach the maximal amount myself and I’m planning with a 110K salary going forward, because of contributions too low the previous years (that’s with normal retirement at age 65, not FIRE).

We can get our data if we ask, but most people don’t because they don’t know they can, think everybody gets the same benefits (yes, in Switzerland, even social insurances give better benefits to the people who contribute more…) and, mostly, don’t care until they’re getting very close to retirement.

That knowledge should be basic, it should be taught in school along with the legal rights we have and how votes are counted, yet, it’s not, and most people vote for/against retirement reforms based on incomplete or wrong assumptions.

Not really, what I’m saying is that some (many) people don’t have any bargaining power regarding salary to begin with. What having social contributions mandatory partially paid by the employer does is getting the governement to step in and do part of the negociations for them. The government has more bargaining power than a waiter or an agricultural worker so it’s probably beneficial for them.

My assumption is that some of the companies who can would try to drive the price down and that would take it down for the whole industry as their competitors would have to adapt to that to stay competitive. It may be wrong, we seem to have diverging experiences in life and of people’s behaviors. It matches what I’ve seen so far in my life but I’m far from having a comprehensive experience of life in Switzerland and lack real experience from the employers side of things (so am biased, as we probably all are).

1 Like

I don’t understand what would the government negotiate and how would the contribution split help in any way. There are 3 values:

  • the nominal salary
  • the nominal salary minus employee’s contribution
  • the nominal salary plus employer’s contribution

I don’t get why it has to be like that, but this pattern is present in many countries, for sure in CH and PL. In Poland there were once talks about combining all the taxes and contributions into one supertax, but this idea quickly died, I guess it occurred to them the that people would realize how much money is deducted in total.

By the way, in Poland the 1. pillar has a deficit since a long time (total pensions currently paid are higher than total contributions) and it will only get worse. This gap has to be filled with money from other taxes and accounting tricks. What’s the point? Better to end this farce. It’s clear that it’s the government’s obligation to pay pensions, regardless of how much money goes in as contributions.

Thankfully? I hope that Switzerland will oppose it in every possible way. Just because other countries burn money with their bureaucracy and inflated governments and subsidies, doesn’t mean we need to do the same.

I would prefer that we would get rid of the 1. pillar and put everything into the 2. pillar instead and maybe increase the percentages a bit. I don’t think it should be a government function to pay pensions.

3 Likes

The true goal of the pension system is that you are taken care of when you’re unable to do it yourself anymore. If there was only the 2nd pillar, then many people would not have saved enough and thus would live in poverty once retired. In extreme cases they could even become homeless. On the other hand we have people who actually don’t even need a pension system, because they save and invest enough outside of it. It’s not them that the system is for.

So in my view, the pension system should only ever provide a minimum that allows you to live modestly, and there should be some redistribution. But there is no easy answer, we will surely have to tackle with this issue in the future.

2 Likes

That’s what it currently does, more or less?! (if we discount for non-mandatory contributions in pillar 2)

AHV/AVS should - in theory - cover subsistence needs. At a maximum monthly of CHF 2390 for a single, it hardly does even that.

1 Like

Slightly going off-topic this thread… :grimacing:

One interesting question would be: Are we in this forum “too aware” or are others “too unaware” of financial matters?

One thing that is also a bit of a problem is that in school, at least in my case, one learns absolutely nothing about personal finance. I’ve spent years at school reading latin poetry, but personal finance? Zero.

4 Likes

Same. For the economy to grow most money should be spent, credits should be taken and so on. That‘s why it‘s not taught :wink:

1 Like

I don’t know either but my bet in these kinds of situations is usually historical reasons. At some point, these contributions were added and it was probably an easier bill to pass by splitting the amount in two.

As for the negociation part, it’s not really negociation but when I worked as a waiter (in several different places), I’ve very, very seldom got anything above the minimal conventional wage. My take is that in those jobs, salaries wouldn’t necessarily be higher if the employee paid the whole contributions, they’d just have less to take home. It’s hard to say there’s a lower limit beyond which the jobs wouldn’t be taken because it’s the kind of jobs where workers from other countries with lower costs of living compete so permanent residents may be simply driven out of the market and into unemployment insurance or other social services (providing, once again, indirect subsidies for business by having the community pay for the low wages).

The governement is the only insitution that can guarantee that the pension will be there when you get old, unless we collectively fail as a society (though it’s on us to work toward prosperity so that we can flourish as a society). Even pension funds can fail and have the money you’ve put in disappear.

That’s what I often end up thinking when I compare the U.S. societal system and ours, on a different level: we tend to be heavily protected against ourselves. From what I understand of the U.S., it’s a much more predatory society where they easily let the sardines sit at a poker table with the sharks. Not saying personal finance isn’t an untouched subject intentionally, here, because I do think so. We are a land of insurances, some serve a real purpose but many flourish on our ignorance. And they pay for part of our taxes and pensions so I’d wager some people think it’s actually for our own good that we are uneducated.

Thankfully, internet and widely available means of communication are providing means to somehow change that. At least it’s evening the odds somewhat, giving people grown up in poorly informed background a shot at getting their fair chance at the table.

1 Like
By reading and partipating to this forum, you confirm you have read and agree with the disclaimer presented on http://www.mustachianpost.com/
En lisant et participant à ce forum, vous confirmez avoir lu et être d'accord avec l'avis de dégagement de responsabilité présenté sur http://www.mustachianpost.com/fr/