Switzerland, like many rich countries, faces a pension crunch. An ageing population is putting pressure on public finances, and a recent referendum has added to the strain. In March 2024, voters approved a 13th monthly payment to recipients of the state pension scheme—equivalent to a 8.3% rise in annual payouts—due to begin next year. How to fund this new benefit has become a pressing political question.
This week, the Council of States, Switzerland’s upper house, approved a financing plan backed by the left and centre. It proposes raising wage-based social-security taxes and increasing value-added tax (VAT) in two stages, reported SRF. The first step would fund the 13th pension. The second, conditional on a future referendum, would finance the removal of a cap that currently limits married couples to receiving one and a half pensions, compared with two full pensions for unmarried ones.
The proposal is a win for the Socialist Party, the Greens and the Centre Party, who have long demanded additional funding to support more generous pensions. It is a setback for the centre-right (PLR/FDP) and the right-wing Swiss People’s Party (UDC/SVP), who opposed both the original pension increase and the new funding mechanisms.
Yet the political battle is far from over. The National Council, Switzerland’s lower house, has a different balance of power. The centre-left bloc lacks a majority and will need support from the Green Liberals, who are wary of the compromise package. Critics, particularly from the PLR/FDP and UDC/SVP, argue that the plan front-loads tax increases to fund a benefit whose full scope has not yet been approved by voters-removal of the marriage penalty. They warn that the second phase of VAT and payroll-tax hikes may prove politically unpalatable.
Higher payroll taxes will fall more heavily on younger workers, raising questions about intergenerational fairness. For now, the left can claim a partial victory in the upper house—but whether it survives scrutiny in the lower chamber remains uncertain. The financing of Switzerland’s 13th pension payment remains up in the air.
More on this:
SRF article (in German)
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