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First pillar pension reform gets priority in Switzerland

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The Swiss parliament is to be presented with a reform draft for the first pillar by the end of this year.

This means the ministry of the interior will have to come up with a legal draft for consultation before the summer holidays.

The Swiss government decided this at the end of last week.

The government wants to increase the statutory retirement age for women to 65 to match that of men.

At the same time incentives are to be introduced for people to work beyond that age limit.

Funding gaps facing the first pillar buffer fund AHV/AVS from 2020 are to be filled by an increase in value-added tax (VAT). The gaps are set to arise as a result of retirements in the baby boomer generation, with a major dip in the buffer fund’s finances due around 2024. The fund is due to run out of assets by the end of 2030 at the latest, according to calculations previously run by Switzerland’s federal social security office.

The government also indicated that the ministry of the interior would be arranging talks between employer and employee representatives to discuss a reform of the second pillar.

Stakeholders had agreed to negotiations “without any fixed expectations on any outcome”, it said. However, no details or a timetable were given for the reform of this part of the Swiss pension system. 

This new two-pronged strategy for changes to the Swiss pension system became necessary after the “Altersvorsorge 2020” reform package failed to be accepted in a referendum in September last year. This had addressed the first and second pillars together.

If financing by a VAT increase is chosen as the best way to prop up the first pillar buffer fund then this proposal would have to be put to a binding referendum again because any VAT change has to be sanctioned by the voting Swiss population.

The government stressed that despite the now two-pronged approach to a reform “the overall goals remain the same”.

Those were to: “maintain the current pension pay-out level, ensure sufficient financing of the retirement provision over the medium-term, and better serve the need for flexibility”.

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  • Bern, Switzerland

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