Last update: 16.09.2024 18:25
Wohoo, job done? Parliament and the Council of States have agreed on the 2021 AHV reform and have done the job for us. The measures agreed will affect us all. Because the level of AHV pensions depends on it. We have studied the decisions. Want to know what this means for you?
Negative AHV contribution result: structural financial problems
You have probably heard in one of our previous articles or from the media that the AHV is having serious money problems. You need to know that the AHV works a bit like a big fondue pot into which chefs are constantly grating cheese and guests immediately eat the cheese. The first group are people of working age and the other group are pensioners. The AHV is therefore a pay-as-you-go system. The cheese added to the pot is immediately eaten again. Unfortunately, there are fewer and fewer cooks and too many hungry guests. In the past, there were more children, so more cooks, who added cheese for a long time. Today, guests are living longer and longer. If you think back to the image of the pot: in order to always have enough money (cheese) in the pot, either “someone” can put more money in the pot or “someone” can reach into the fondue pot less often or for less time. Or both.
Last AHV reform 2020 sunk at the ballot box
The structural mechanism for financing the AHV must therefore be reorganized. The last attempt to do so was the “Altersvorsorge 2020″ pension plan, which failed at the ballot box in 2017. At that time, the first and second pillars were to be reformed as a package. As this did not work as a package, the Federal Council decided on two stages. Stage 1 “Repair AHV”, then stage 2 “Bring the second pillar into line”.
A lot has happened at a political level in 2021 with regard to AHV reform. The National Council and Council of States agreed on a proposal in mid-December after a long back-and-forth. In order to increase the chances at the ballot box, the councils have made the original AHV 21 proposal more “women-friendly”. Nevertheless, the trade unions promptly announced a referendum against the AHV reform. However, the issue will be put to the people anyway because the constitution will be used to increase VAT. So let’s take a look at what the 2021 AHV reform will bring for women and men.
Key points of the AHV reform 2021: AHV 21 project
In simple terms, the reform to stabilize the AHV(Business 19.050) provides for three main measures. Firstly, the AHV 21 should bring a uniform reference age of 65 for women and men. Secondly, you will be able to choose the date of your pension more flexibly. And thirdly, all of this will be financed by a higher value-added tax, among other things. You will probably be able to vote on the points agreed by the National Council and the Council of States in September 2022. Let’s take a closer look at the points in detail.
In future, women and men will work the same amount of time to receive a full pension
What is it all about? In future, women and men will work until the reference age of 65 – only then will they receive a full AHV pension. This higher reference age applies not only to the first pillar, but also to the second pillar. Incidentally, the term “reference age” will be used in future and the term “retirement age” will disappear. With AHV 21, the reference age for women will be raised in four steps of three months each.
Who is affected? Of course, this affects women, especially those born in 1964 or later. The intention is to take greater account of changing life models, employment biographies and the longer life expectancy of women. If the reform comes into force in 2023, a reference age of 64 years and three months will apply for those born in 1960 and 64 years and six months for those born in 1961. From the 1964 cohort onwards, the reference age for women will be 65.
With AHV 21, certain cohorts of women receive a lifelong supplement to their AHV pension
What is at stake? The consequences of the higher reference age with AHV 21 are mitigated for women born between 1960 and 1968. They will either receive a lifelong pension supplement or their pension will be reduced less in the event of early retirement. Depending on the year of birth and the regular pension, the pension supplement is between CHF 12 and CHF 160 per month. The pension reduction also depends on the pension amount; women with low pensions can retire at 64 without a reduction. Low incomes are those up to CHF 57,360 per year, medium incomes up to CHF 71,700 and high incomes from CHF 71,701 per year. The equalization package reduces the savings from the higher retirement age by around a third.
Who is affected? Women born between 1960 and 1968 benefit from the pension supplement because the change comes quickly for them. Younger women, i.e. born in 1969 or later, do not receive any compensation for their increased age because they would have enough time to adjust to the changes.
Retirement in installments with AHV 21 for women and men
What is it all about? You can now make a smooth transition from working life to retirement by initially drawing only part of your AHV pension and deferring the rest. You can take your pension between the ages of 63 at the earliest and 70 at the latest. In addition, you can now take your pension in monthly rather than annual increments.
Who is affected? Everyone who wants to enjoy a smooth transition into retirement will benefit from this new option.
Working pensioners can increase their pension with voluntary contributions
What is it all about? Some pensioners work in retirement and earn an income from this. In principle, this is also subject to AHV contributions at retirement age. This is why there is an AHV allowance for pensioners. This is currently CHF 16,800 per year (as at 2021). As a pensioner, you will not have to pay AHV contributions in future either, as long as you earn less than the AHV allowance. Until now, however, contributions paid in excess of the allowance were no longer included in the pension calculation. As a working pensioner, you now have the right to choose. You can decide to use the pension allowance or alternatively pay contributions on your entire income to increase your pension.
Who is affected? New pensioners can improve their lifelong AHV pension by paying AHV contributions from their earned income below the pensioner’s allowance. In this way, they can close contribution gaps and increase their average annual income on which the AHV pension is based.
Value added tax rises to 8.1%
What is it all about? Let’s briefly think back to the image of the AHV as a pot pay-as-you-go system. Raising the reference age reduces the period in which women take money out of the pot. The increase in VAT provides more money in the pot. The tax rises by 0.4% points to help finance the reform. The new standard rate is 8.1%, the reduced rate is 2.6% and the special rate is 3.9%.
Who is affected? VAT is a tax on consumption. This means that everyone who consumes in Switzerland contributes to the financing of the AHV reform. Pensioners also contribute to the stabilization of the pension system through VAT.
Pension initiative and 13th AHV pension as further AHV reform proposals
As I said, we may vote on the 2021 AHV reform in the fall of 2022. It should come into force on January 1, 2023 at the earliest. So that we don’t get bored in the jungle of voting proposals, we can also decide on two other initiatives.
Popular initiative “Secure and sustainable pension provision”
The pension initiative(BBl 2021 1957) wants the retirement age to be raised to 66 for both men and women. In addition, in future it should develop in line with life expectancy, i.e. increase automatically if life expectancy continues to rise. We think this is basically a sensible idea because it links the payment of contributions and the receipt of benefits.
Popular initiative “Better life in old age”
The initiative for a 13th AHV pension(BBl 2021 1505) calls for a 13th pension, similar to the thirteenth salary paid in many employment relationships. The bottom line is that the initiative calls for a general pension increase of 8.33 percent. We believe this is a one-sided increase at the expense of the contributors, i.e. the younger generation.
Summary of the AHV reform 2021
The AHV must be restructured financially. To this end, AHV 21 for women proposes adjusting the retirement age to 65 and mitigating the consequences of this. Furthermore, the higher value-added tax should bring in more money to stabilize the AHV’s pay-as-you-go result. As these measures do not go far enough, the AHV will be in the red again by 2027, even after the implementation of AHV21. Parliament has therefore instructed the Federal Council to draw up a further reform for the period from 2030 by 2026. We will certainly be able to vote on this again at the ballot box. What can we expect then? Almost certainly a further increase in the reference age to 66 or 67 and/or higher taxes to finance it, as a reduction in benefits (lower pensions) is even more unpopular.
However, you don’t have to wait until fall 2022 or 2027 to put your future on a stable footing. Make the most of your opportunities and take the first step with us.
Mach den ersten Schritt zur finanziellen Unabhängigkeit
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