Swiss Government Pension Hurdles Affects Citizens

Swiss citizens have recently been embroiled in numerous battles pertaining to country’s pension system. The first hurdle was that of reaching a general consensus on the pension or retirement age, 63% of Swiss citizens opposed raising the pension age to 67 in case the country’s social insurance plan (AHV) encounters financial problems.

A recent study conducted by a local Swiss newspaper found that 23% of Swiss citizens supported the pension age proposal made by the parliamentary commission. The results are in line with previous surveys, which opposed increasing the retirement age to 67 from 64 for women, and 65 for men.

The parliamentary commission wants the retirement age to increase automatically. According to the report if the social security deductions collected from salaries cover less than 80% the rise would be automatic. The age would increase in four months increments up to a maximum of 67 years.

The parliamentary commission says the change would not take effect before 2028 and would require a change to the Swiss constitution. Given the circumstances the Swiss Federal Council is considering a proposal to make pension payments compulsory for self-employed workers in the same way they are for salaried workers.

It is noteworthy to consider that the Swiss pension system has three levels. It includes a universal state pension funded from social security payments, along with a second element known as the second pillar, which is built up from sums deducted from salary, and finally a third pillar which is optional tax deductible amount granted annually.

Presently self-employed individuals are not required to pay into a second pillar fund, government officials are concerned that this group of people are not saving enough money and they risk requiring government aid when they retire. The Federal Council Parliament voted to take a closer look on the issue and include them.

Nevertheless the Swiss People’s Party (UDC/SVP) is against the proposal, arguing that self-employed pensions must continue to be governed individually.

Union Demands Rejected

Various Swiss unions have recently been campaigning to increase the Swiss pension, their plan calls for a 10% increase in pension payments was put forward in a referendum on 25 of September 2016. The vote to increase state pension failed in the referendum results.

The Swiss government said that the cost of the plan is high as CHF 4.1 billion and believed it would compete with existing plans to reform Swiss pensions. Like the government there are other Swiss political parties against the plan, these include the Swiss cross-party group and the Liberal Radical Party, they think that increasing the pension would further strain the pension system would burden young people with higher salary deductions to support a growing number of retirees.

As the Swiss population ages, the pension fund gap will also increase as the number of workers paying into the system declines. To deal with the problem the government has developed a plan called “Old age pension 2020,” which aims to reduce pension payments and increases VAT by up to 1.5% and increase the retirement age of women to 65 just like men.