At its meeting on March 2, 2018 the Swiss Federal Council debated how to financially stabilize Switzerland’s retirement program (AVS/AHV*) make it more flexible, and what measures should be taken to make this happen.
Since the overall reform “Prévoyance/Vorsorge 2020” was rejected by the people during the September 24, 2017 referendum, the Swiss Federal Council decided to propose the necessary measures for the 1st pillar (AVS/AHV) and the mandatory part of the 2nd pillar (LPP/BVG) in two separate projects. The objective remains the same: to maintain the level of benefits and to ensure medium-term financing of Swiss social security.
Measures designed to stabilize the AVS/AHV (1st pillar)
The funding of the AVS/AHV is deteriorating rapidly and the rejection of the reform has only reinforced the need for action. The Swiss Federal Council considers it essential that AVS/AHV be reformed. This is why a preliminary draft of reform measures will be submitted for consideration this summer. The goal of this reform is to stabilize the finances of the AVS during the next decade.
AVS reform will include the following measures:
- Introduce a reference age of 65 for both women and men.
- Financial compensation for raising the retirement age of women.
- Flexibility of the effective retirement age. People could collect all or part of the AVS/AHV annuity between 62 and 70 years.
- Introduce a reference age of 65 and the possibility of anticipating or postponing part of the pension in the occupational pension scheme (2nd pillar).
- Encouragement of continuing professional activity after the reference age.
- Medium-term financing of the AVS/AHV by means of a VAT (Value Added Tax) increase. A single increase of up to 1.7 point at the time of the entry into force of the reform is foreseen.
Next steps for the reform of the occupational pension system (2nd pillar)
The Swiss Federal Council will discuss occupational pension measures to adapt the 2nd pillar to demographic and economic developments with Swiss Employers’ Union and the Swiss Trade Union.
* The old-age and survivors’ insurance (AVS = assurance-vieillesse et survivants/AHV= Alters- und Hinterlassenenversicherung) and the invalidity insurance (AI/IV) together form the 1st pillar, i.e. the social security. The pensions paid out by both schemes are intended to cover basic living costs