Migration from the EU and European Free Trade Association (EFTA) countries has a positive impact on funding the first pillar pension system in Switzerland in the longer term, with people paying significantly more contributions than benefits received, according to a study conducted by the universities of Zürich and St.Gallen on behalf of the Federal Social Insurance Office (FSIO).
The results of the study have for the first time confirmed findings published in the annual report of the Observatory on the Agreement on the Free Movement of Persons between Switzerland and the EU, that did not look at the longer term effects.
The positive outlook for the first pillar’s funds AHV, IV and EO stretches over a period up to 2070, and is the result of the population becoming younger through migration flows, newcomers integrated in the labour market, and with high average income, compensating with their contributions for the increasing amount of benefits paid, the study said.
The majority of people that have relocated to Switzerland are aged between 25 and 60 years old, and have an average income of around CHF70,000 (€73,976) per year, the same as the people born in Switzerland, as of 2020.
The researchers found that contributions of EU/EFTA immigrants to the first pillar’s funds exceed benefits both in a calendar year (cross-sectional analysis) and in a life cycle perspective (cohorts analysis).
The cross-sectional analysis shows that in 2070 immigrants will still make significantly more contributions – a little less than 50% of the total – than benefits received (around 40%), while people born in Switzerland will make fewer contributions – a little more than 50% of the total – than benefits (around 60%).
The cohort analysis shows that immigrants do not receive a disproportionate amount of benefits compared with the contributions they make, with the ratio being the same up until 2070 for people coming from other countries and those born in Switzerland.
In the case of third-country nationals, coming from countries outside the EU/EFTA area, the share of benefits received slightly exceed the contributions paid, the study showed.
The impact of migration on the Swiss welfare state has been the subject of intense debate since the Swiss-EU Agreement on the Free Movement of Persons (AFMP) came into force in 1999.
The annual net migration to Switzerland averaged 66,000 people from 2002 to 2020, around two thirds were people from EU/EFTA countries. Migration will decrease slightly from 2030 onwards, but will remain constant from 2040 onwards, according to the Swiss Federal Statistical Office.
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