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# **Table of Contents**

|I. INTRODUCTION ................................................................................................................1|
|---|
|1.1<br>THEPURPOSE ANDSTRUCTURE OF THEPAPER..........................................................3|
|1.2<br>EMPIRICALBACKGROUND: DEMOGRAPHICS.............................................................4|
|II. THE SWISS PENSION SYSTEM......................................................................................7|
|2.1<br>THEFIRSTPILLAR.....................................................................................................7|
|_2.1.1_ _Overview ..............................................................................................................7_|
|_2.1.2 Contribution Rates in the First Pillar....................................................................8_|
|_2.1.3_ _Benefits in the First Pillar....................................................................................9_|
|2.2<br>THESECONDPILLAR: OCCUPATIONALPENSIONPLANS..........................................12|
|_2.2.1_ _Overview ............................................................................................................12_|
|_2.2.2_ _Contribution Rates and Capital Accumulation in the Second Pillar.................14_|
|_2.2.3_ _Benefits in the Second Pillar: Overview ............................................................16_|
|_2.2.4_ _Annuities in the Second Pillar............................................................................16_<br>|
|_2.2.5_ _The Capital Option.............................................................................................18_|
|_2.2.6_ _Administration Costs..........................................................................................21_|
|2.3<br>COMBINEDREPLACEMENTRATES..........................................................................21|
|2.4<br>EARLYRETIREMENT...............................................................................................24<br>|
|2.5<br>DISABILITY.............................................................................................................27|
|III. REGULATION................................................................................................................29|
|3.1 IMPORTANTFACTS ONINTERESTRATES AND THEANNUITYCONVERSIONFACTOR.....29|
|_3.1.1 The annuity Conversion Factor ...........................................................................30_|
|3.2<br>MINIMUMINTERESTRATEREQUIREMENT UNDERBVG .........................................31|
|_3.2.1_ _Comparison of Returns on Investment...............................................................32_|
|_3.2.2_ _How is the Minimum Interest Rate Determined?...............................................34_|
|3.3<br>INVESTMENTREGULATIONS OFPENSIONFUNDS.....................................................35|
|3.4<br>CAPITALREGULATION OFPENSIONFUNDS.............................................................35|
|3.5<br>TRANSPARENCY IN THEOCCUPATIONALOLD–AGEPROVISION..............................38|
|3.6<br>OTHERREGULATORYASPECTS...............................................................................38|
|IV. MONEY’S WORTH RATIOS ........................................................................................41|
|4.1<br>MORTALITYRATES.................................................................................................42|
|_4.1.1 Mortality Improvement Rates...............................................................................44_|
|4.2<br>YIELDCURVES ANDDISCOUNTRATES...................................................................44|
|4.3<br>MONEY’SWORTHRATIOS IN THESWISSSYSTEM...................................................46|
|_4.3.1 Computations of Money’s Worth Ratios ..............................................................47_|
|<br>_4.3.2 Money’s Worth Ratios since 2000........................................................................48_|
|_4.3.3 The Recent Reform...............................................................................................50_|
|_4.3.4 Mortality Tables by Marital Status ......................................................................51_|
|4.4<br>DISCUSSION............................................................................................................53|
|V. THE ORGANIZATION AND VOLUME OF SECOND PILLAR.................................55|
|5.1<br>INSTITUTIONS ANDORGANIZATION.........................................................................55|