The statutory retirement age in Switzerland is 65, but the Federal Council would like the population to work longer. Why is that?
Switzerland’s population is aging and people live longer, an encouraging development which nevertheless presents a challenge.
According to Avenir Suisse, a think-tank for economic and social issues, “the number of retirees in Switzerland will grow by 61 percent by 2035, while the working population will only increase by 7 percent in the same period.”
This means that the first-pillar state pension (AHV / AVS) spending will increase sharply over the next 10 years, but not enough money will flow into the system in a way of social security contributions from the working population to continue financing the scheme in a sustainable manner..
As a result, if no measures are taken in the meantime, the AHV / AVS is expected to show a deficit of 2.5 billion francs within five years.
What is the government’s solution?
To prevent this scenario from happening, and to keep money flowing into the pension fund, the government would like people in Switzerland to continue working beyond the statuary retirement age of 65.
Yes, but there is a fundamental problem with this idea: in a national referendum held in March 2024, 74.7 percent of voters rejected the proposal by the youth section of the Liberal Radical party to extend the retirement age to 66 in order to guarantee the medium-term financing of the pension system.
So if the vast majority of the population is against higher retirement age, why is the government still pushing for it?
The difference is that now this move would be optional rather than mandatory.
“We should let people decide themselves how long they want to work,” said Federal Councillor Elisabeth Baume-Schneider, who is overseeing the Federal Social Insurance Office.
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How will the government go about convincing people to continue working?
In a way of incentives, the Federal Council wants to increase the contribution allowance.
Currently, anyone who continues to work past the statuary retirement age has to pay social insurance contributions on the income above 16,800 per year.
The government is hoping that raising this contribution-exempted amount (to as-yet undetermined sum), will make the post-retirement employment more appealing.
READ ALSO: What is Switzerland’s retirement age – and will it rise?
