SWITZERLAND - The Swiss government has conceded that the first-pillar fund AHV is healthier than previously predicted.

The government had said that, by 2020, the deficit in the pay-as-you-go fund, which is expected to occur any year now, will have reached "a size which can no longer be reduced by the expected returns from the invested assets".

The fund's liquidity will by then have fallen to about half of what the fund will have to pay out in a year, it said.

In addition to factors such as wage increases and inflation, the calculations were based on Switzerland's net immigration quota, which had been expected to settle at around 15,000 people per year by 2030.

However, over the last two decades, the average was closer to 38,000, and it has more than doubled over the last nine years.

While it stood at 21,000 for the period between 1991 and 2000, it grew to 52,000 between 2000 and 2009.

New calculations use an average of 40,000 while at the same time looking at scenarios with 10,000 immigrants fewer or more.

Structural changes in the Swiss economy represent another factor that has "so far been underestimated", according to the government.

It cited the fact new entries to the labour market not only bring more contributions to the AHV but also higher contributions as the economy creates new and better paid jobs.

Assuming the best-case scenario, the AHV will only start to "dry up" from 2030, the government said.

It said it was aware that, in the near future, "measures will be necessary" to ensure the AHV's financial balance, but it added that, from a current point of view, there was "enough time" to discuss those measures.

In its calculations, it also found that, in the "normal" scenario, the funding gap in the AHV will have reached CHF8.5bn (€6.7bn) a year.

It added that this equalled the income potential from either a 1.9% increase in salaries, 2.4% increase of VAT or alternatively the savings potential from increasing the retirement age for men and women by three years.

Either this year or in the next, the basis for a revision of the AHV's legal framework will be prepared, the government said.