Swiss Review 6/2019

Swiss Review / November 2019 / No.6 16 Society MIREILLE GUGGENBÜHLER InMay of this year, the big Swiss bank UBS spooked savers by announcing that account holders would no longer re­ ceive any interest on their savings. Thiswas unprecedented, as the public had always been rewarded with interest for entrusting their money to banks. Benjamin Manz, manag­ ing director of the Swiss banking and insurance compari­ son website moneyland.ch , believes that UBS has turned the acceptedwisdomof savings returns upside down. “Zero per cent interest basically means that it no longer pays to save.” But UBS is not alone. Interest rates are at record lows at all Swiss banks, where the average rate of interest on savings accounts is 0.05 per cent. According tomoneyland. ch, the average interest rate on personal accounts is 0.00 worth having your money tucked away in a conventional savings account,” says Karl Flubacher of VZ Vermögens­ Zentrum in Basel, adding that many Swiss are concerned by this. “Saving is a big issue in our consultations.” Sowhat will happen to saving – this quintessentially Swiss attrib­ ute – if the incentive to save has gone? Job security is vital Theory number one: When personal assets lose value, peo­ ple just start spending more. Wrong, says André Bähler, head of politics and economics at the Swiss Consumer Pro­ tection Foundation, who believes that the nation’s eco­ nomic health is the main factor influencing consumer be­ haviour among savers. In his view, job security has amuch more direct effect on consumer habits than low interest rates. “If I know that I will still be in a job tomorrow, my behaviour as a consumer will be different to what it would be if my work situation was unclear – not that the current interest rate climate isn’t having any effect at all, I hasten to add.” Desire for alternatives remains limited Theory number two: Facedwith record-low interest rates, the Swiss are looking to other forms of saving and invest­ ing. BenjaminManz of moneyland.ch explains that the av­ erage Swiss saver is reluctant to experiment. “We are still waiting for alternative investments to catch on properly in this country. The Swiss are risk-averse. Only rarely will they try a different approach.” However, he does not rule out the possibility of a behavioural change in the future. Are we hiding more money under the mattress? Theory number three: Instead of looking to alternative forms of investment, more Swiss savers are withdrawing their money – and stashing it under the proverbial mat­ tress. There are no fresh figures to support this hypoth­ esis, but a survey carried out by the Swiss National Bank in 2017 provides some clues. Back then, the SNB wanted to know why people chose to hide their monetary assets in this way. Seven per cent of those questioned – anything but a sizeable contingent – said they had resorted to this tactic in order to save money and/or because they were No interest for savers Saving money for a rainy day is a very Swiss virtue. However, savers have little to cheer about at present. The interest on their savings accounts has never been so low. Their assets are simply stagnating. per cent (September 2019). Interest rates in Switzerland have never been this low. “The current low level of nomi­ nal and real interest rates is unprecedented,” writes Peter Kugler, Professor of Economics at the University of Basel, in an essay for the economic magazine “Die Volkswirtschaft”. Extremely low interest, coupled with inflation and the various fees that many banks have introduced, have re­ sulted in savings effectively losing value. “It is no longer Generations of Swiss learned how to save money from an early age. Record-low interest rates have now made saving almost irrelevant.