This week, Switzerland’s Federal Council unveiled the outline of a new plan to reform Switzerland’s state pension system. The initiative stops short of raising the statutory retirement age, but aims to make early retirement less attractive, encourage work beyond the age of 65, and strengthen the system’s long-term financial sustainability, reported RTS.
The primary objective is to incentivise older workers to remain in employment, Social Affairs Minister Elisabeth Baume-Schneider told journalists in Bern. We want to remove the resistance surrounding the upper age limit (currently 70) and allow people to work longer if they choose, she said.
To that end, the government proposes eliminating the current AVS contribution ceiling at age 70 and increasing the AVS earnings exemption for those continuing to work beyond 65. Meanwhile, early retirement will be disincentivised—likely through a less favourable conversion or annuity rate on pension entitlements, according to Stéphane Rossini, head of the Federal Social Insurance Office.
While raising the statutory retirement age is not on the table, Baume-Schneider acknowledged in a public interview that the idea is not permanently off the table. The government’s current focus, she said, is on laying the groundwork for a more comprehensive future reform.
Any such change would take time to implement and require transitional measures. The fiscal benefits would likely materialise only gradually. Nonetheless, the government intends to examine this possibility in the context of the next reform cycle.
The government also took the opportunity to reject several funding proposals floated by political parties and interest groups. A financial transaction tax, inheritance tax, or capital gains levy on real estate will not be pursued. Instead, the Federal Council prefers to rely on proven mechanisms, notably payroll tax contributions and VAT, to finance the system.
The government is also considering temporary measures limited to the critical period when the baby-boomer generation retires. In addition, it may propose the introduction of an automatic correction mechanism to address imbalances if political responses are delayed or if state pension finances deteriorate sharply.
The state pension faces a dual challenge over the next decade: an ageing population and a wave of baby-boomer retirements. Outlays are projected to outpace revenue. Currently, some 2.5 million people draw a state pension. That figure is expected to rise to 2.8 million by 2030 and 3 million by 2035, while the working-age population will grow only modestly.
Without reform, the state pension would face a deficit of CHF 2.5 billion by 2030, rising to CHF 5.7 billion by 2040.
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