Rue de Lausanne 35a
Rue de Lausanne 35a
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In Switzerland, old-age pension provision is divided into three pillars: state, occupational and individual. The AHV is the first, state pillar. Employees pay into the AHV pillar through their salaries which is matched by companies. Employees and companies each pay 5.3% of their gross salary into this pillar. In addition, AHV collects money through VAT. Value added tax (VAT) is a tax that each person pays through daily purchasing activities for example someone buying groceries.
The reason the vote took place is that AHV is expected to spend more than it takes in. The federal government expects that AHV will be short on funds of approximately 18.5 billion francs over the next ten years therefore the need to reform AHV to supplement for these missing funds.
On September 25, 2022, Swiss voters voted on reforming AHV. This reform consisted of two bills.
With a voter turnout of 52.5%, the additional financing of the AHV through an increase in VAT passed with a 55% to 45% Yes to No ratio. With the same turnout increasing the women's retirement age passed with a 51% to 49% Yes to No ratio.
The laws are expected to come into force on January 1, 2024 and are intended to help finance the 1st pillar until 2030.
There are three VAT rates that will increase:
As a result of the increase in VAT, the Swiss government expects that the AHV will earn around CHF 12.4 billion moreover the next ten years.
The retirement age for women increased from 64 to 65. The increase will take place gradually every 3 months per year, with the first increment being planned for 2025. The retirement age of men and women will therefore not be fully aligned until the year 2028.
Women who are about to retire are particularly affected by this transition phase. All women born between 1961 and 1969 are entitled to receive lifelong pension supplements to compensate for this transition phase. The pension supplements vary depending on the year of birth. It is also worth noting that lifelong supplements only apply to women in the transitional generation who do not take their old-age pension early.
The changes will reduce AHV expenditure by around CHF 4.9 billion over the next ten years. In addition, it is possible for everyone to retire flexibly between the ages of 63 and 70. There is a deduction from the pension for earlier retirement and a surcharge for later retirement.
Anyone who works beyond the retirement age does not pay AHV contributions if they make less than 1,400 Swiss francs. The scenario prior to AHV 21 reforms saw anyone making wages above 1,400 Swiss francs are subject to AHV contributions but do not lead to a higher old-age pension.
After the AHV 21 reform came into force, the AHV contributions paid after age 65 are also taken into account for the pension calculation. In this way it is possible, on the one hand, to close previous gaps in contributions and, on the other hand, to increase your personal OASI pension with the contributions paid.
The AHV 21 reform is a first step in the restructuring of the pension schemes - but this only secures financing until 2030. After that, the AHV threatens to run into a deficit again. A reform is also being discussed for the second pillar: BVG 21. It is currently being discussed in Parliament.