Questions and answers on the initiative for a 13th AHV pension
- 04 Feb 2024 8:50 am CET
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On March 3, the people and cantons will decide on the popular initiative "For a better life in old age (initiative for a 13th AHV pension)" launched by the trade unions. Below are the most important questions and answers on the proposal:
HOW IS THE PENSION PLAN STRUCTURED?
Old-age provision consists of the AHV (first pillar) introduced in 1948, the pension fund (second pillar) and payments into a private pension (third pillar). Low-wage earners in particular often only receive an AHV pension. Those who are unable to support themselves with their pension can apply for supplementary benefits. AHV pensions are paid out monthly, twelve times a year.
HOW HIGH IS THE AHV PENSION TODAY?
The minimum pension for unmarried people is currently CHF 1225, the maximum CHF 2450. Married couples receive up to 3675 francs, which is one and a half times the maximum pension. The pension is calculated on the basis of contribution years, earned income and child-raising and care credits. More than 2.5 million pensioners currently receive an AHV pension. AHV pensions are generally adjusted for inflation every two years, based on the arithmetic mean of the price index and the wage index (mixed index).
WAS WILL DIE INITIATIVE?
The popular initiative for a 13th AHV pension calls for a "thirteenth" for the AHV pension, as many working people know it. Specifically, all pensioners should be entitled to a supplement amounting to one twelfth of their annual pension; this would increase it by 8.3 percent. Anyone already drawing an AHV pension should also receive the supplement. The initiative is to be implemented from the start of 2026. The initiative does not specify how the 13th AHV pension is to be financed. It also calls for supplementary benefits (EL) not to be affected despite the introduction of the 13th AHV pension.
WER WILL DIE 13. AHV-RENTE?
The initiative is backed by trade unions and left-wing parties. The main arguments put forward by those in favor of the initiative are dwindling purchasing power and rising rents. Since 2021, inflation and health insurance premiums have eaten up a monthly pension. "What we want is not luxury," says Pierre-Yves Maillard, SP member of the Council of States (VD) and President of the Swiss Federation of Trade Unions (SGB). The AHV is not social welfare, but income deferred into retirement for people who have worked all their lives. According to initial polls on March 3, a majority of respondents are in favor of a 13th AHV pension. Support is particularly strong in French-speaking Switzerland and Ticino.
WER IST GEGEN DIE 13. AHV-RENTE?
The SVP, FDP, Center Party and GLP as well as Economiesuisse, the Employers' Association (SAV), the Trade Association (SGV) and the Farmers' Association (SBV) recommend a "no" vote. The opponents call a 13th AHV pension based on the watering can principle unsocial and expensive. The opponents do not deny that there are pensioners in need who have to get by on little money. However, they and Social Affairs Minister Elisabeth Baume-Schneider advocate targeted support for pensioners with low incomes. The National Council has already adopted a motion from the GLP along these lines; the Council of States still has to decide. It has received a similar motion from the Center Party.
WHAT DOES THE 13TH AHV-RENTE COST?
The federal government assumes costs of CHF 4.1 billion when it is introduced in 2026. Five years later - due to the rising number of pensioners - it would be CHF 5 billion. In the opinion of the initiators, the AHV is currently sufficiently financially cushioned to bear the additional expenditure. Employers' and employees' salary contributions would only have to be increased by 0.4 percentage points each from around 2030. Opponents are of the opinion that wage contributions and/or VAT would have to be increased immediately after a yes vote in order not to jeopardize the AHV. There is talk of a 0.7 percentage point increase in wage contributions and a one percentage point increase in VAT to 9.1%. Social Affairs Minister Elisabeth Baume-Schneider is also not ruling out higher taxes in order to finance the CHF 800 million increase in federal contributions to the AHV. However, a combination of different measures is also possible.
HOW HIGH ARE THE VOTING BUDGETS?
Pro and con are budgeting millions for the referendum campaign. However, at around CHF 3.6 million, the opponents have far more in their coffers than the supporters with over CHF 1.5 million. According to the Swiss Federal Audit Office (SFAO), it is mainly business associations that are investing in the No campaign. The funds for the Yes campaign come mainly from the trade unions and the SP Switzerland.
WHAT IS AHV'S FINANCIAL SITUATION?
The AHV pay-as-you-go result - income excluding investment income minus expenditure - is positive until 2030 without the initiative. It then turns negative due to the rising number of pensioners. With a 13th AHV pension and without countermeasures, the pay-as-you-go result would be negative from 2026 - the year of introduction; the income from AHV investments could still ensure a positive operating result. From 2027, however, the operating result would also be red. According to the law, the AHV fund must be able to cover at least the full annual expenditure of the social security scheme. Without the 13th AHV pension, this is likely to be the case up to and including 2032 and no longer from 2033. With the 13th AHV pension, the fund would no longer be able to fully cover the AHV's annual expenditure in 2027 - one year after its introduction. In the longer term, the AHV's financial prospects are uncertain.
WHAT ABOUT LIFE EXPECTANCY?
When the AHV was introduced in 1948, the life expectancy of a 65-year-old man was 12 years and that of a 65-year-old woman just over 13 years. In 2020, it was 19 years for 65-year-old men and 22 years for 65-year-old women. Despite a slight dip as a result of the Covid-19 pandemic, life expectancy is likely to continue to increase. In addition, Switzerland experienced strong population growth between 1955 and 1970, thanks in part to the baby boomers born between 1954 and 1964. Those born in that decade are now reaching retirement age, causing the number of retirees to rise. While there were 6.5 people of working age for every pensioner in 1948, there were still 3.3 people of working age in 2020. According to the Federal Statistical Office (FSO), there could still be 2.2 people of working age per pensioner in 2050.
WHAT ARE THE BABY BOOMERS DOING?
The Federal Social Insurance Office (FSIO) speaks of 500,000 to 700,000 additional births during the so-called baby boom. Although the AHV, which operates on a pay-as-you-go basis, has additional income thanks to this generation, it now also has to finance its pensions. Not only in Switzerland, but worldwide, the number of people of working age is falling compared to pensioners. In the long term, therefore, the problem of the Swiss pension system is unlikely to be solved by immigrants of working age.