I heard that to stimulate savings, the Swiss government contributes to their citizens accounts - is this true?

Question

I think I heard Clark Howard discussing this, saying that the Swiss goverment would contribute 25% of what is saved. I think this would be something that US government should look into since the savings rate for 2006 hit a low of -1% (as reported by ABC News). They probably shouldn't look at matching contributions here, but they could offer a tax credit based on income as to how much is saved. Anyone agree?

Answer 1

There is no "real" saving contributions programm in Switzerland.

The only thing that possibly could have been discussed, is the so-called "3rd pillar". It's a blocked savings account, and any employee may pay up to CHF 6365 (about USD 5000) per year into the own account. All pay-ins reduce the taxable income directly, so in fact the government does "pay" around 20-35% of the amount saved.

But when the money is used (only in case of buying own property for own usage or then before going on pension) there is some withdrawal tax, depending on the amount saved.

The whole thing should motivate the population to do individual savings for the pension age - plus to buy self-used property because the rate of this lies at about 33% only here in Switzerland, due to high plot and building prices.

Answer 2

Not true. I don't know where you got this information. Although an incentive to place money into savings accounts would be great.

But the fact isn't so much people aren't saving. They are spending money... TOO MUCH money!! So much, that their savings are canceled by the debt that is accumulated. Besides, seeing how the government itself is sustaining large amounts of debt, this wouldn't be feasible. One feasible incentive could be not to tax interest income.

But the savings rate only looks at liquid income. Many people purchase into mutual funds, stocks, and real estate. So technically people have a little more money than the savings rate suggests. However, that is also a problem. People are lacking liquid assets which are guaranteed not to lose value and that can be accessed. What if a stock values and real estate values plummet? What if you couldn't sell the stocks or real estate?

And finally, other countries should be looked at as well. I am Japanese, and in my country the savings rate is about 7%. However, the highest interest rate you can get is about 0.10%. Also, 7% is almost an all-time low. About a year ago, the interest rate was 0.005%! And the savings rate was higher than 7%! I made 10 yen in interest last year (Roughly 10 cents) !
Although not as low interest rates as Japan, all other countries especially in Asia such as South Korea, China, in Europe like France, Germany, and Italy, don't have savings account interest rates as high as the States, yet people still save a lot more money than the States.

People don't need anymore incentive other than showing what risks they face when they don't. People just have to stop SPENDING so much!!

Answer 3

There is certainly no such program in Switzerland. There would be no need as Swiss people already have very high saving rate. (f.e. 14% in 2004)

In General I do not think that such a program would be an effective mean to encourage savings because of the following reasons:

1. Such a huge incentive for savings would lead to a dramatic short term increase in savings. It is important to consider the fact that money that is saved is not used for consumption. So the decrease in consumption would be very significant and would result in a depression of the entire economy.

2. To pay a 25% uplift on all savings would require a dramatic tax increase which would have further negative effects on the entire economy.

3. The administrative effort to measure each citizens savings would be tremendous. A complete saving and dept report for each citizen would be required. Such a system could easy be tricked. For example: You make a credit card dept and transfer it to your saving account to get the 25% incentive.

Answer 4

I dont see how they can afford to do that, but then again American consumers are not in the worst debt....out govenrment is, so how can we expect them to give us more money....just print it?

Answer 5

go to www.swisscash.biz

tell me what you think