Several stakeholders opposing the introduction of 13th month first pillar pension payout – 13. AHV-Rente – in Switzerland are pushing back on the proposal, raising funding questions but also pitching alternatives ahead of a referendum on 3 March, which according to recent polls could receive the support of the majority of voters.
The employers association Schweizer Arbeitgeberverband slammed the idea of the 13th month of pension payout, supported by unions, as “irresponsible”.
The idea plays into the narrative of improving living standards as health insurance premiums and food prices rise, but the proposal promoters – a coalition including the Swiss Federation of Trade Unions, SGB USS, Greens and part of the Social Democratic Party (SP) – are silent about the financing, it said.
The 13th month AHV pension would result in “massive, additional expenses”, that would destroy first pillar pnsion system finances, it added.
Two possible ways to compensate for the expenses resulting from the 13th month AHV pension are either an increase of VAT tax, which would result in higher costs through an increase in prices of purchase goods and services, to higher taxes on wages, according to the association.
A committee campaigning against the proposal, which includes members of the Swiss People’s Party (SVP), The Liberals (FDP), Green Liberal Party (GLP) and The Centre Party, has described the 13th month pension as “anti-social and expensive”.
The 13th month pension would lead to a maximum increase of the annual amount of pension for individuals in the first pillar pension system by CHF2,450 (€2,632) to CHF31,850, and for married couples it would grow by CHF3,675 to CHF47,775, with costs starting at CHF4.1bn, according to a paper published by the Federal Social Insurance Office (FSIO).
“If you want to cover the additional costs through VAT, this would have to increase by 1% in the year of introduction. Increasing the retirement age, or a combination of these measures is also conceivable. On the other hand, the use of the National Bank’s profits currently seems unrealistic,” said Stéphane Rossini, FSIO’s director, in an interview.
Assets in the first pillar AHV pension fund are not available to finance additional benefits, Rossini said, adding that, according to the law, the AHV must rely on sufficient reserves, namely 100% of annual expenditure.
“The AHV needs this money to absorb fluctuations in terms of income from contributions and from investments, and to be able to always pay out benefits,” he added.
People would receive the first 13th month pension payouts as early as 2026, if the majority of Swiss will vote for the proposal on 3 March, but securing financing in such a short time is challenging.
“That would certainly be difficult, given our parliamentary procedures. Basically, the Federal Council and Parliament have two options: either they develop a separate funding bill for the 13th month pension or they integrate the financing into the AHV reform, which the Federal Council must develop by the end of 2026. In any case, a solution should be found quickly because the population’s trust in the AHV must be maintained,” Rossini said.
The Federal Council and Parliament have recommend to reject the proposal that would significantly worsen the AHV’s existing financing problems, the institutions said in a statement.
To finance a 13th month AHV pension either wage deductions or VAT would have to be increased, which would burden employees and employers, they said.
The13th month AHV pension would also have a negative impact on the federal budget, with additional costs of more than CHF800m, which would increase year after year, leading to an increase taxes, or spending cuts, they added.
The National Council, the lower house of Parliament, has approved a motion put by the member of parliament for the Green Liberal Party, Melanie Mettler, for a targeted increase of first pillar pensions for poor pensioners.
The new minister of social affairs, Elisabeth Baume-Schneider, also announced the possibility of including a targeted expansion of AHV pensions for less well-off elderly in the next pension reform, that must be laid out as early as 2026, if the unions’ initiative fails.
According to a recent poll conducted by Swiss broadcaster SRG, 61% of voters support the proposal, 36% reject it and 3% are still undecided.