How the SRRI is calculated

The index simulates the financial trajectory of a typical individual: entering working life at age 22, uninterrupted career until 65, then retirement until death (life expectancy at 65: 26 years, i.e. 91 years).

For each day, the model calculates net income after all deductions (social contributions, taxes, LAMal premiums) and benefits (AVS, LPP pension capital). The net replacement rate is the ratio between the first net income at retirement and the last net income during working life.

The calculation is performed for 5 salary distributions (P10, P25, Median, P75, P90), 26 cantons, then aggregated as a population-weighted average.

The salary profile is built from the Swiss Earnings Structure Survey (ESS) by the FSO. Three age cohorts are interpolated: under 29, 30-49 and 50 and over.

The annual gross salary is projected with a nominal growth rate of 0.8% per year (0.5% inflation + 0.3% real growth). The 5 percentiles (P10 to P90) of the salary distribution capture income disparities.

The AVS pension is calculated according to scale 44 (full career, art. 34 AVSG, art. 53 AVSV). The determinant average annual income (RAM) is revalued each year according to a mixed wages/prices index.

The annual pension is determined by bracket based on RAM. It ranges from the minimum pension (CHF 15,120/year in 2025) to the maximum pension (CHF 30,240/year, twice the minimum). The minimum pension is indexed annually according to the average of inflation and nominal wage growth.

Mandatory occupational pension (LPP/BVG) is modelled according to legal bonification rates applied to the coordinated salary. The coordinated salary is the part of salary between the coordination deduction and the LPP ceiling.

The calculation is based on the legal LPP minimum. For salaries above CHF 90,720 (mandatory insured ceiling in 2025), the index tends to underestimate LPP capital, as the supra-mandatory portion is not modelled.

Capital is accumulated year after year with a credited return, dynamically derived from the Pictet CH LPP 25 fund (see EWMA section below).

Pillar 3a is not included in the SRRI index calculation. This decision is deliberate: 3a is an individual choice, not a mandatory system benefit. Including it would have biased the index upward for only a fraction of the population.

However, 3a is available as an optional parameter in the personal calculator. The user can set their contribution rate from 0% (no payment) to 100% of the legal ceiling. The 2025 ceiling is CHF 7,258 for employees affiliated to a pension fund (indexed with the AVS minimum pension).

When activated, the 3a capital is accumulated at the same return as the 2nd pillar, and the withdrawal is taxed at 1/5 of the normal rate jointly with the LPP capital.

Income tax is calculated by canton from a grid of effective rates (tax burden) for the reference year 2025, covering 26 cantons and over 25 income brackets.

To correct for bracket creep during the projection, nominal income is deflated to the purchasing power of the reference year before interpolation in the tax grid.

At retirement, the withdrawal of pension capital (LPP, and 3a if activated in the calculator) is taxed at 1/5 of the normal marginal rate (fifth principle).

Employee social contributions (employee share) are levied on gross salary:

Source: AVS-iv.ch, sheet 2.01

Mandatory health insurance premiums come from the official BAG/FOPH file. The model uses the 25th percentile (P25) of premiums by canton and by region, averaged across premium regions.

Premiums increase by 3.5% per year. This growth is not offset by pension indexation at retirement, which causes progressive erosion of net income.

Cantonal subsidies are not taken into account in this model. They would protect lower incomes from cost increases by introducing health cost financing through taxation.

Retirement income consists of:

• AVS pension - according to scale 44 and final RAM, not re-indexed after retirement
• LPP capital pension - accumulated LPP capital, net of withdrawal tax, divided by remaining life expectancy (26 years). 3a is added if activated in the calculator.

Income tax and LAMal premiums continue to be levied during retirement. Premiums increase by 3.5% per year while pensions remain nominally fixed, creating growing pressure on net income.

The net replacement rate is the ratio between the first net income at retirement (age 65) and the last net income during working life (age 64), expressed as a percentage.

A rate below 70% signals a risk of significant reduction in living standards. This rate is calculated for each canton and each salary percentile, then aggregated into a national index.

The credited return on LPP capital is derived daily from the Pictet CH LPP 25 I dy CHF fund (ISIN CH0016431667), which serves as a proxy for Swiss pension fund performance. The same return applies to 3a when activated in the personal calculator.

The method follows three steps:

1. Calculation of daily log-returns of the net asset value (NAV)
2. Exponentially weighted moving average (EWMA) with a half-life of 365 days
3. Annualisation of the average return (252 trading days per year)

The fund NAV is net of fees (TER included), which ensures the return reflects real performance after management costs.

The SRRI index is the average weighted by resident population (FSO 2023) of cantonal replacement rates. The 26 cantons are weighted by their permanent resident population. Zurich (1.58 million) weighs about 100 times more than Appenzell Innerrhoden (16,000).

The index is published for 5 income percentiles (P10, P25, Median, P75, P90). The main figure displayed on the home page corresponds to the Median, representing the Swiss worker at median income.

• Continuous career The model does not account for career interruptions (unemployment, leave, part-time).
• Single canton Tax residence is assumed constant throughout career and retirement.
• No re-indexation AVS and capital pensions are not re-indexed after retirement (conservative assumption).
• Uniform return The same return (Pictet LPP 25) is applied to LPP, and to 3a when activated, without distinction of investment strategy.
• Individual situation Single person, no children, no assets. Family deductions and LAMal subsidies are not modelled.
• Mandatory LPP only The supra-mandatory portion (common in practice) is not included.
• Static tax grid The 2025 tax scales are used throughout the projection, adjusted only for bracket creep.