Pension funds respond quite well if they have sufficient freedom

Prof. Dr. Dr. h.c. Monika Bütler first studied mathematics. She is an honorary professor at the University of St. Gallen, where until 2021 she was a full professor of economic policy and director of the Swiss Institute for Empirical Economic Research, which she co-founded. She is a member of the board of directors of Huber+Suhner, Schindler Holding and Swiss Life. Monika Bütler is considered one of the ten most influential economists in Switzerland.

In an interview with KPMG’s Prof. Dr. Reto Eberle, she addresses challenges in social and economic policy and calls, among other things, for greater financial literacy in schools.

Prof. Dr. Reto Eberle

Partner, Member of the Department of Professional Practice

KPMG Switzerland

mail
call

Prof. Dr. Reto Eberle: When it comes to the big issues – such as AHV – it feels as if the Swiss people are struggling to make the necessary adjustments and to finance the social security system in a sustainable manner.

Monika Bütler: Old-age insurance is special in several respects. On the one hand, it concerns us all, which is why public interest is so high. On the other hand, having to think in terms of several generations and over such long periods of time is complicated.

In the case of occupational pension plans, to name another major area of concern, we are talking about contracts that run for 50-70 years. Such a long time frame is a challenge for us as voters. For politicians with a much shorter planning horizon, securing pensions is treacherous; there are no laurels to be won with reforms. Direct democracy does not make comprehensive reform any easier.

However, the topic is proving a hard nut to crack in countries with other forms of government as well, as the recent unrest in France so clearly demonstrates.

Our daughter is 18 years old and is just finishing grammar school. It has been my experience that the curriculum does not provide much financial education to high school students. Do we need more basic financial education in our schools?

Absolutely. In my opinion, economic education in general and financial literacy in particular don’t get enough attention. My sons had to solve these “well” problems for the grammar school entrance exam.

No one will ever in their life have to fill a bathtub with two pipes and three drains, but everyone has a bank account. And calculating interest and compound interest would be no more complicated than the well problems, after all, but much more true to life. Basic financial knowledge should be included early in the curriculum, and certainly at vocational schools and high schools.

Retaining the advantages of the traditional family model while at the same time switching to a more modern division of labor doesn’t add up.

Should women in particular pay more attention to financial issues?

There are certainly shortcomings. However, the lack of discussion in schools is only part of the reason why women lag behind men in terms of financial knowledge. Women also often lack the opportunity to practice, i.e. they often have fewer funds available to invest in middle age because of family responsibilities.

In addition, studies show that women tend to be more risk-averse than men and have less confidence in themselves. Fortunately, for the past 20 years or so, there have been many initiatives and activities to make the financial world more accessible to women. Here, too, dedicated female scientists have contributed to many advances.

Let’s perhaps go back to the topic of financial literacy among young people. What is also a concern is the high level of debt in this age group. People want to afford things like cars or travel at a young age, but they don’t have the financial means to do so. These young adults then start their working lives already in debt.

That is unfortunately the case, but the phenomenon is not a new one. It’s tempting to get something instantly without having to save up for it. On the other hand, “falling flat on your face” with debt at a young age, while painful, can also be helpful for decisions later on in life.

We also observe that even higher-income families can find themselves without savings or financial security. The virtue of making independent financial provisions has apparently been lost in many sections of the population. It may also no longer be as necessary. Scientific data shows that people tend to save less and have more debt in countries with a high standard of social security. If you know that the state will take care of you, you have to make fewer provisions yourself. That is completely rational.