The issue of retirement age is once again at the center of a federal referendum. On March 3, the Swiss will vote on the popular initiative of the Young Liberal-Radical Party, which wants to raise the retirement age and index it according to life expectancy. Other countries have already taken this step.
Just over a year after deciding to raise the retirement age for women from 64 to 65, the Swiss will go to the polls on March 3 to decide whether to raise the age to 66 for everyone.
If the proposal is passed, the Confederation will follow the trend of Organization for Economic Cooperation and Development (OECD) countries, where the average retirement age will gradually rise to 65.7 for women and 66.1 for men by 2060, according to the OECD's Pensions at a Glance.
Why are we voting on retirement age again?
The retirement age for women in Switzerland was raised on January 1, 2024. It will be raised gradually in four stages until the age of 65. This change is part of the reform of the old-age and survivors insurance (AHV), the first pillar of the Swiss pension system, which was approved by the Swiss in a federal referendum in September 2022.
Three months after its enactment, the issue is back on the agenda. This time, the people are being asked to vote in favor of a federal popular initiative launched by the Young Liberal Radicals (JLRS/Right) in July 2021, which has collected 145 000 signatures.
The initiative, entitled "For a secure and sustainable old-age pension system", proposes to gradually raise the retirement age for men and women to 66 by 2033. In the second phase, it would be linked to life expectancy, meaning it would automatically rise when life expectancy increases and vice versa.
Specifically, the plan is to increase the retirement age by 80% of the increase in life expectancy. This means that if life expectancy increases by one month, the retirement age will increase by 0.8 months. The idea of the initiative's supporters is to allow people to spend about 20% of their lives in retirement. Under the formula, people would be able to retire at 67 in 2043 and 69 in 2070.
While this solution to the problem of funding pensions has been adopted by the young LDP, it is not new. The Bourgeois Democratic Party (PBD) proposed it in 2012 in a motion that was rejected by senators.
What impact will this initiative have on AHV's finances?
The old-age pension scheme closed its accounts in 2022 with a profit of Sh1.6 billion and assets of Sh47 billion. At this point, its finances have stabilized. This is partly due to the AVS21 reform measures adopted in 2022 and the tax reform and financing of AVS (RFFA) adopted in 2019, which have reduced costs and increased revenues.
However, in the medium term, there is no guarantee that pensions will be funded as the pension system faces structural challenges. On the one hand, the number of people receiving pensions is growing faster than the number of people in paid employment. On the other hand, as life expectancy increases, pensions must be paid for longer. According to the projections of the Federal Social Insurance Office (FSIO), the AHV will be in deficit from 2031 onwards.
Raising the retirement age to 66, as called for by the initiative, would save around CHF 2 billion by 2030, again according to OFAS. This would guarantee the financing of pensions until at least 2033.
What are the main arguments in favor of this initiative?
According to JLRS, the first pillar needs to be put on a sustainable footing urgently to prevent the old-age pension system from going bankrupt. The policy group presents its text as a solution that guarantees the long-term financing of the AVS, without reducing pensions or increasing taxes.
The authors of the initiative also believe that linking the retirement age to life expectancy would depoliticize the issue by introducing an automatic mechanism to adjust the base age.
As we live longer, we also have to work longer to fund our pensions, the JLRS say. They note that other Western countries have already taken similar measures.
What are the main arguments against the law?
The government points out that pensions are currently funded for the next ten years or so. Measures will certainly have to be taken to ensure long-term funding of the first pillar. However, the Federal Council is already developing an AHV stabilization plan for the period from 2030 to 2040, which it will submit to parliament in 2026.
The Federal Council also believes that the demographic challenge facing the old-age pension system cannot be solved by raising the retirement age alone. In its view, other measures, including additional funding, must be taken.
The Swiss authorities are also not satisfied with the proposal to link the retirement age to life expectancy. According to the Government, such an automatic system does not sufficiently take into account either the actual situation on the labor market, especially for the elderly, or the social situation.
Finally, such an automatic system is incompatible with the Swiss political system. By enshrining the retirement age in the Federal Constitution, the Federal Council, Parliament and the people would be deprived of the discretion necessary to take other criteria into account.
The outcome of the referendum will have far-reaching consequences for the Swiss pension system. If the initiative is approved, it will lead to an increase in the retirement age for all Swiss and possibly further increases in the future.