AHV 21: These are the most important changes

AHV 21 reform: The most important changes compared with today

The Federal Council wants to safeguard the first pillar (AHV/Old Age and Survivors' Insurance) until 2030 by means of the AHV 21 reform. To do so, it is meeting the needs of insured by allowing greater flexibility in the retirement age. In addition, the Federal Council is providing incentives to continue working for longer. The reform will be financed by bringing the retirement age for women into line with that of men and increasing value added tax.

Growing financing gaps in the AHV fund 

AHV revenue and expenditure have not been balanced since 2014 and since then funding gaps in the AHV fund have been growing. In 2019, the fund balance had a deficit of CHF 1.17 bn. The electorate knows how urgently reform is needed. Nevertheless, the 2020 pension reform bill was rejected in 2017. The Federal Council responded promptly to the "no" vote, and adopted the dispatch on the AHV 21 reform in the summer of 2019 – which still needs to be approved by Parliament and the electorate. Discussion of the matter in Parliament was concluded in December 2021, and a referendum against the bill has already been called for. If the bill is accepted in the popular ballot, it could enter into force at the start of 2023 at the earliest.

Financial performance of the AHV fund with and without the AHV 21 reform

Financial performance of the AHV fund with and without the AHV 21 reform

Source: Federal Social Insurance Office, Credit Suisse

The main objectives of the AHV 21 reform

For the Federal Council, the AHV 21 reform has two main objectives: 
    1. To maintain the level of AHV pensions.
    2. To maintain the financial security of the AHV up to 2030.

These are the most important changes envisaged by the AHV 21 reform

    1. The reference age (at present retirement age) for women would be increased from 64 to 65. This applies to both the first and second pillar. Specifically, the intention is that, after the reform enters into force, the reference age should be raised in stages, by three months per year. Because women who are due to retire soon are particularly affected if the bill is accepted, the plan is for there to be compensatory measures in the form of lifelong pension supplements for nine cohorts of the transitional generation.

    2. The choice of when to draw your pension is more flexible. Both men and women would be able to draw their pension from the age of 63 at the earliest or defer it until they are 70 at the latest. In addition, the reform would make it possible to draw a pension gradually, either by reducing the level of employment and deferring or drawing only part of the pension early, or by taking retirement in monthly instead of annual stages.

    3. Working beyond the reference age of 65 can increase a person's pension amount, thereby providing an incentive to work longer. An exemption of CHF 1,400 per month continues to apply, on a voluntary basis. However, whereas contributions paid in excess of that in the past were not included in the calculation of a person's pension, the AHV 21 reform envisages other possibilities for boosting your pension: Contribution gaps can be closed in this way and the average annual income on which the AHV calculation is based increases.

This is how the AHV 21 reform will be financed

• Increase in value added tax by 0.4% for an unlimited period.
• Increase in the reference age for women from 64 to 65.

The AHV 21 reform was passed by Parliament on December 17, 2021. A popular ballot is mandatory to change the level of value added tax. The revised law is subject to an optional referendum, which has been proposed. Because the requisite number of signatures has been collected, there will also be a popular ballot in this case. The reform will only enter into force if the electorate accepts both bills.

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