How does Migros Bank assess the future prospects of the Swiss social security system in the face of the demographic challenges represented by an increasingly smaller active population and a growing pensioner population?
Mentor Prenaj: «At first glance it may seem that the Swiss social security system rests on solid foundations, thanks to the famous 3 pillars, which have the characteristics of something fundamental and sustainable in the long term. However, the future prospects remain gloomy and difficult: the group of people with the highest birth rate, also called baby boomers, is slowly reaching retirement age and above all for these people it becomes important to plan the third phase of their life in time. life. Our social security system has been facing challenges related to the aging population for years, which is why the current debates focus on possible corrections to pensions and the retirement age to maintain the effectiveness of the system as much as possible."
What solutions are offered by the AVS21 reform, and to what extent will it need to be rethought in order to ensure the sustainability of the Swiss social security system in the future?
Mentor Prenaj: «The AVS21 reform aims to pursue two important objectives: maintaining the current level of pensions and guaranteeing the financial balance of the AVS. This will happen concretely through the following four solutions: gradual raising of the reference age to 65 for women, flexibility in the retirement age, incentives for those who wish to continue working beyond 65 and finally thanks to the increase in VAT which will therefore guarantee additional income.
The AVS21 reform therefore represents a necessary first step towards restoring the social security funds. However, the work is not finished: it is expected that the reform will guarantee financing at least until 2030, therefore the risk remains that beyond this date the AVS will return to being in deficit and other reforms will still be necessary".
What are the main contents and limits of the next LPP reform which will give rise to popular votes within the year?
Mentor Prenaj: «With the LPP reform the conversion rate of compulsory social security will be reduced from 6.8% to 6%; due to this decrease, compensation measures will be envisaged for the transition generation who will receive a financial leveling for the first 15 years after the entry into force of the reform based on their retirement assets. Facilities are also foreseen regarding old-age credits aimed at strengthening the competitiveness of older people in the world of work.
Finally, the coordination deduction and the entry threshold will undergo a reduction: the latter will go from the current CHF 22.050.- to CHF 19.845, thus also allowing people who earn lower incomes to be insured in the professional pension scheme.
The reform has the main objective of strengthening the financing system and guaranteeing long-term income, on the other hand the reform also means a decrease in pension fund income and greater salary deductions for workers in a context where the rising cost of living is the protagonist, consequently leading to a greater loss of purchasing power".
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How does Migros Bank offer targeted advice on personal needs planning in relation to pension planning?
Alberto Crugnola: «In Migros Bank we follow a consultancy process that aims to obtain the right intervention plan so that each client can achieve their financial goals upon retirement. In a first preliminary interview we analyze the client's needs from the point of view of the desired income upon retirement, which could also be set before reaching 65 years of age. We then proceed with the financial analysis during which an intervention plan is prepared to be followed in the years to come. The same is presented to the client and discussed together. We then follow the customer at every subsequent moment, reminding him, for example, when it is necessary to deposit assets into the 3rd pillar, when to invest in other forms (bonds, investment funds, investment mandates, etc.), for example when to withdraw a first part of the pension capital, and so on, even after retirement".
What products and services are made available by Migros Bank to encourage the growth of one's personal wealth?
Alberto Crugnola: «We have four specific offers that can be adapted to each customer. From "Basic Planning" to "Standard" Planning, and increasing in complexity we offer "Advanced Financial Planning" to conclude with "Expert" Planning. Our consultancy is subject to the payment of a commission but this allows us to offer customers any investment solution on the market, without precluding anything, therefore not only considering only Migros Bank products. It should be underlined that even with simple measures recommended by us, the tax savings obtained largely cover the costs of consultancy".
What added value does a customer obtain by taking the "planning path" with Migros Bank?
Alberto Crugnola: «The added value is certainly having a competent and reliable partner at your side, who follows the customer at every moment of his journey towards the realization of his dreams when he reaches retirement. The plan presented during the first consultation is constantly monitored by us and adapted to any changed situations on the social insurance front, as well as the capital market and the economic situation in general".
Looking at the current performance of the financial markets, what predictions can we make regarding the reference interest rates in response to the inflationary pressure of the last two years?
Valentino Guggia: «In Switzerland, the eurozone and the United States, the peak in rates was reached late last autumn. Now the financial markets' focus has shifted to rate cuts thanks to falling inflation. On the futures markets, the Federal Reserve and the ECB anticipate this already in the spring. These expectations, however, clash with the official rhetoric of the respective central banks. During their meetings in January, both Fed Chair Jerome Powell and ECB President Christine Lagarde made it clear that both institutions do not expect cuts any time soon. Despite the different economic situation, with an economy growing robustly in the States while limping in the Eurozone, there is a common factor that attracts the interest of central banks: namely the still sustained wage growth. An excessive increase in wages is counterproductive, as it increases companies' costs, with the risk that they pass them on to consumers by increasing prices. This dynamic slows down the decrease in inflation. Before proceeding with the easing of monetary policy, both the Fed and the ECB therefore want to be sure that wage growth is also within normal limits. Migros Bank plans to cut interest rates starting in the summer. In Switzerland the problem of excessive wage growth does not exist, inflation has been below 2% since last June and the economic situation is subdued due to poor external demand, but all in all it is holding up. The Swiss National Bank is therefore under no pressure to act soon. In fact, we expect that it will only adjust the director rate in September, and then leave it unchanged for a long time. Currently, monetary policy in Switzerland is not restrictive, but rather neutral. After a decade of rates close to 0 or negative, the SNB has an opportunity to restore the notion that liquidity is not free."
What consequences arise from the nominal and real appreciation of the Swiss franc against other reference currencies, especially after the SNB's decision to sell some foreign exchange reserves?
Valentino Guggia: «Over more than a decade of ultra-expansionary monetary policy, the SNB has purchased enormous quantities of foreign currencies (mainly euros, US dollars and British pounds), with the aim of weakening the value of the franc. Starting from June 2022, the SNB began to sell foreign currencies in its possession, allowing the franc to strengthen. This monetary policy tool made it possible to avoid importing part of the high inflation from abroad. However, last December, SNB President Thomas Jordan announced a stop to sales of foreign currencies. The difference between foreign and Swiss inflation has narrowed markedly and with each appreciation nominal now corresponds to greater appreciation real, which puts pressure on the competitiveness of the Swiss export industry. In fact, trade associations have recently made their concerns heard. The business situation is not rosy due to sluggish global demand and the real appreciation of the franc represents an additional challenge."
