Should old age pensions increase?

Voters are to decide on a people’s initiative calling for a 10% boost in benefits from the state retirement fund – a move supported by the political left, but deemed far too costly by its opponents.

The increase would affect the state pensions given to all retirees via the first pillar of Switzerland’s three-pillar retirement system (the other two pillars being occupational pensions and private savings).

If accepted, it is expected to cost an extra CHF4 billion ($4 billion) a year from 2018, increasing to CHF5.5 billion by 2030.

The latest poll, on September 14, showed voters likely to throw out the proposal, with only 40% of respondents saying they would be in favour of the move.

The trend towards a no vote has increased in the later stages of the vote campaign, pollsters noted, with even pensioners deciding against it (in August, 56% would have voted for the pensions hike, but by September this had fallen to 42%).

“Needs a boost”

The initiative’s backers, which include the Trade Union Federation and leftwing political parties, say that the state pension plan needs adapting because occupational pensions are coming under financial pressure. They argue that those with low to middle incomes in particular rely on their state pensions to make ends meet.

Everyone is entitled to an old-age pension in Switzerland and the constitution states that the payments must be enough to cover basic living costs.

But opponents, including the govement, say the initiative - if approved - would be too expensive and put more pressure on an already stretched social security system.

They also decry its “scattergun” approach to the distribution of funds, saying that not everyone would need the extra money.

Pension reform

Also key for them is the outcome of a major old age pension reform currently under discussion in parliament.

The goal of Retirement 2020 is to ensure the financing of pensions from 2020, when the Baby Boomer generation – those bo in the 1950s and 60s when the birth rate was high – will begin to retire, placing more strain on the pension system.

The increase in average lifespan also means that not only will retirees be drawing their pensions for longer, but the two main sources of pension funding – active workers and investment income – will decline.

The govement argues that its plan already offers a way to solve the pensions problem “through balanced reforms” and does not see any “financial leeway” for higher first pillar pensions. Parliament has also rejected the initiative.

Having a say

Currently, a retired person who is single receives between CHF1,175 and CHF2,350 per month. A married couple receives CHF3,525 per month.

It’s not the first time the Swiss have been asked to decide at the ballot box on reforms to state old age pension scheme. Over the past two decades, voters have rejected nine proposals – either to review its financing or to raise the retirement age to cope with an ageing population.

But it is the first time since 1995 that voters have the final say on a proposal to increase pension benefits.

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