The Swiss government is proposing to finance the 13th month of pension – 13. AHV-Rente – mainly by increasing the share of contributions to the first pillar AHV, and value-added tax (VAT), as it starts a consultation, which is open until the beginning of July.

The rule on the 13. AHV-Rente, approved in a referendum in March, will enter into force in 2026, and will cost CHF4.7bn (€4.7bn) per year, the government said introducing the text for the consultation.

The cabinet intends to fund one month more of paid pensions per year either by increasing contributions to the AHV from wages by 0.8 percentage points, to cash in around CHF3.8bn in 2030, or by increasing contributions from wages by 0.5 and VAT by 0.4 percentage points, it said.

The latest option will bring in around CHF2.4bn from contributions and CHF1.5bn from VAT, for a total in 2030 of around CHF3.9bn, it said.

The state finances 20% of the annual expenses of the first pillar fund AHV, meaning that public expenses will increase to CHF930m, out of CHF4.7bn, including the 13th month of pension, in 2030.

To avoid putting further pressure on the state budget, the share of annual expenses of the first pillar fund AHV covered by public funds will decrease to 18.7%.

The government plans to close the CHF950m funding gap either by deploying assets in the AHV fund, meaning that reserves will decrease every year, or through a combination of contributions from wages and VAT, it said.

The financial situation of the first pillar system in Switzerland will deteriorate from 2031, even without the 13th month of pension, and despite the reform that entered into force this year, increasing VAT and the retirement age for women to 65 years old.

For this reason, the government considers a further reform of the first pillar necessary, and is working on proposals to send to parliament by the end of 2026, for the period from 2030 to 2040.

Meanwhile, the cabinet has a tight schedule ahead to implement measures to finance the 13th month of pension by 2026.

The consultation on the proposals to finance the 13. AHV-Rente will last until 5 July 2024, with a message for the parliament expected to come in autumn, it added.

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