Note: Pensions in Liechtenstein are based on a “three pillar system” (Similar to Germany).
The 1st pillar is a mandatory Government Pension. This is part of their basic social security. All employees and employers pay a percentage of salaries into this system.
The 2nd pillar is a mandatory Corporation Pensions. There is an upper and a lower threshold stipulated by law, but businesses are free to set contributions anywhere between these thresholds.
The 3rd pillar (not addressed in this speech) is Voluntary Personal Pension.
Dear Members of Parliament,
In the coming months this Parliament will consider some reform bills that are of great importance for the ongoing protection of our society. The most important being the proposed bill to reform the health insurance and pension laws. The pension reforms relating to the AHV (age and survivors' insurance) - The "pay as you go," (Government Pension) is the first pillar of retirement - and the Corporate pension funds, is the second pillar of retirement.
The cost of our social security, particularly our government pension, has gone up significantly in recent years and is among the fastest growing state spending. Because of the ever-increasing labor costs they are also an increasing burden on enterprises and for individuals insured. The recent decision of the Swiss National Bank to disclose the exchange rate of the euro means for our company directly, for our state and social system indirectly an additional challenge.
It is foreseeable that we can only maintain our social systems with radical reforms. Several developments have led to this situation. In the area of healthcare, especially in medical advances, there has been a huge increase in costs. This also has an impact on retirement: We are living longer, but fortunately also staying healthier longer. At the same time we also have fewer children, who can contribute to pensions.
Moreover, there have been may changes in employment: More people no longer a work for the same employer all their life, part-time work is increasing and more and more people work without permanent employment, working for different employers. The latter is a trend that has been increasing, especially in the United States of America with the technological development, and is likely to happen in Liechtenstein more in the future.
The social welfare systems has a very important function in the pension and social equalization in our country. Social welfare systems exist only as long in sociality as they are financially sustainable and provide adequate support, efficiently and accurately. Otherwise, they are anti-social, when other generations have to pay to foot the bill, of those who have lived a great deal on their support. Previous generations have fought hard to introduce the social systems. It is up to us as today's leaders to maintain these valuable achievements for future generations.
The reform of the Health Insurance Act is a difficult undertaking. Already the reform proposed by the last government were heavily slashed during the legislative process, so now another attempt at the reform is necessary. This new reform proposal was very controversial during the committe stage. In light of the developments in healthcare over the past year we observed, it would be problematic to postpone the necessary reforms.
It is certainly right to hear critical voices and even change the committee recommendations to the Health Insurance Act at one point or another. It would be a mistake, this time to water down the original so much that the next parliament must make a further attempt at reforming the Health Insurance Act.
We are in the fortunate position that our pension cuts are small in comparison to international cuts. But the later we react to the changed conditions, the more difficult and expensive it will be. The recent problems with the pension fund of state employees should be a cautionary tale.
The committee's clever proposal to pension reforms seems to be balanced and therefore politically feasible. It is important that it solves the current problems and provides a new system where future problems can be quickly solved.
For the second pillar of pension, the committees should be working on a reform proposal that will come before Parliament sometime this year. The proportion of the second pillar on the assets of the pension insured has become increasingly larger and as a result significant. This is to be meet with broader support and diversification of pensions. Thus, it is also important to prevent a shortage of this second pillar by efficient, suitable regulations.
Today it is possible to pay for retirement with the accumulated savings in Corporate pension. Given the changing conditions and the increasing importance of the Corporate pension, the question arises whether a full capital payment would cause problems in the future.
Should the number of people choosing early lump-sum payment outnumber people choosing payments over time, this would burden the state budget additionally. Perhaps it would be wise to reserve a part of pension for such emergencies and to limit the possibility of lump-sum payment accordingly.
It also seems doubtful that the people with the lump-sum pension funds can choose freely. They are tied to those plans of the company. Longer-term differences in the performance of the pension funds can significantly affect people's retirement savings. Introducing the freedom to choose from various state-approved Corporate pension funds, however, would be a larger undertaking. But a first step would be to give people better information about the success of their pension compared to other.
Since the developments concerning the demographics and working conditions are unlikely to change, we can not neglect to give pensions further thoughts. The amount foreseen for the AHV pension is an important improvement. But we should figure out how we can make changes to the pensions so that regular political interventions is not needed and the pension can better respond to the new developments in the field of labor.
Another area of pensions that needs attention is the care. When maintaining a pension it is, firstly, about how many male and female pensioners will be claiming the pension in the future. On the other hand the costs of care is the fastest growing government spending. These costs are now hidden in different vessels: the care and nursing allowan
ce, the disability allowance, with the health insurance as well as contributions from the state and municipalities to the nursing homes. The cost of care and it's growth is wearing us thin. We must think now about the cost of care, so that we avoid a larger funding problem in the future.
Demographic trends and the changing working conditions are also a challenge for our companies. It would therefore be advantageous if government and corporations work closely together, in order to develop the best long-term solutions for retirement - especially for reconciling care, family and career. So, we would not only find the right answers to these challenges, but at the same time strengthen the attractiveness of Liechtenstein as a business location.
Dear Members of Parliament,
You will in the coming months make important decisions. I wish you much wisdom, courage and God's blessing.
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