SWITZERLAND - A study produced by the Swiss social ministry has recommended raising the VAT rate and getting rid of the statutory retirement age could help the Swiss pension system to remain sustainable.

To compile their research, the authors looked at pension reforms in France, Italy, Sweden and Germany and drew conclusions for the current pension reform debate in Switzerland.

They drew up three possible models for all of which an increase of the current 7.5% VAT would be necessary.

The first model would see more funds going into the first pillar buffer fund AHV while at the same time payouts from the system would be reduced slightly.

However, the authors noted while this two-way model would appease both the supporters of reducing costs as well as those of giving more means to the systems, a VAT increase would mean a change of constitution and could not be finalised in a regular pension reform bill.

The other two models are based on the principle of awarding people who worked longer and in more physically demanding jobs more credits towards their retirement provision.

This means people who entered working life before the age of 25 and worked in particularly demanding jobs would either have to pay less into the system or would be less affected by cuts.

No matter which of the systems will be taken to further discussion the social ministry also pointed out the current statutory retirement age is hindering flexibility among workers.

"The current system already allows a great flexibility when chosing the point in time for retirement (between 63 and 70 years)," the ministry noted.

"Nevertheless, keeping the statutory retirement age of 65 could be a signal to many which means most people who reach this age are not using the given flexibility."

The paper is one of many which are currently collected to prepare for the next revision of the law regulating the Swiss first pillar.

Tthe 11th revision of the AHV is currently under way but is aimed at allowing early retirement for certain workers who are losing their jobs close to retirement age or who who had worked in physically-demanding jobs.

The next revision, however, will be much more fundamental to tackle the problem of the baby boomer generation retiring over the next years demanding a lot of money from the AHV, a spokesman for the BSV confirmed to IPE.

"Therefore we took a look across the borders to see how other countries tackled reforms with similarly ambitious targets."

He added no reform was yet "in the pipeline" but various options were being discussed.

The authors found in their research that in other countries major reforms were often regarded more favourably by the public than slight amendments to the system.

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