AHV 21: reforming Swiss retirement provision: an overview

Old-age and survivors’ insurance: current situation

AHV refers to old-age and survivors’ insurance (OASI), which is the first pillar of the Swiss pension system and ensures basic provision in old age. It is financed by employer and employee contributions and the federal government. However, rising life expectancy and the falling birth rate are putting a major financial strain on it. Without reforms, it will therefore be increasingly hard to finance OASI in the years ahead. 

Changes in retirement age: introduction of the reference age

One of the main changes brought about by AHV 21 concerns the retirement age, which is now called the “reference age”. Women in particular are affected by the change in retirement age. Previously, women in Switzerland normally retired at 64, while men reached retirement age at 65. Under the AHV 21 reform, the retirement age for women will gradually be increased to 65 to bring it into line with that for men.

Value-added tax (VAT) provides additional financial support for OASI. The increase in VAT from 7.7% to 8.1% will generate additional income to finance OASI.

The transitional mechanism

To make the transition easier for women, a flexible retirement system is being brought in, providing the option to retire between the ages of 63 and 70. Retiring earlier means the pension is reduced; retiring later means a premium is added. This is intended to better suit people’s personal circumstances and at the same time give them an incentive to work longer.

Lifetime premium

Women in the transitional generation who do not retire early will receive a lifetime monthly OASI premium. This is calculated as a percentage of a basic premium.

• The basic premium depends on income and is as follows:
  • CHF 160 for those with a low average annual income (≤ CHF 57,360)
  • CHF 100 for those with a medium average annual income (CHF 57,361 – CHF 71,700)
  • CHF 50 for those with a high average annual income (≥ CHF 71,701)
     
• The individual pension premium depends on the year of birth (see table below).
• The pension premium is not subject to the old-age pension cap for married women and will be paid even above the maximum pension.
• The pension premium for women in the transitional generation is not taken into account when calculating supplementary benefits.

Deferring withdrawal of vested benefit savings

The reform also includes changes to the withdrawal of vested benefit savings. These arise when someone leaves an occupational pension scheme before retirement, for instance when they change job or take time out. At the moment these savings can be deferred for up to five years beyond normal retirement age, to a maximum of 69 for women and 70 for men. Whether a person continues to work is irrelevant.

From 1 January 2030 it will only be possible to defer withdrawing vested benefit savings if you continue to work after reaching normal retirement age and confirm and prove this in writing to the vested benefits foundation. This change applies to those born in 1965 or later.

The ordinance provides a transitional arrangement for the period from 1 January 2024 to 31 December 2029 so as not to jeopardise planning security. During this period, anyone who wishes to carry their vested benefit savings forward beyond the reference age can do so without having to provide proof of employment. This transitional arrangement is intended to give people sufficient time to adjust to the new provisions and adapt their financial planning accordingly.

The requirement to provide proof of employment already applies for deferring withdrawals of Pillar 3a retirement savings.