Swiss resident’s are regularly reminded of the large financial gap is Switzerland’s state pension system. Despite this, several attempts at reform have failed to gain sufficient support. Those that have still leave a large shortfall. On 24 January 2023, UBS published four additional reform scenarios. Only the fourth, with a life expectancy adjusted retirement age of 68.2 years eliminates the current projected shortfall.
Many nations have large liabilities that are not included in their official debt piles. Typically, these promises of money in the future, such as pension payments or healthcare coverage dwarf debts recorded in government ledgers. Switzerland is no exception.
In 2019, the projected state pension deficit was CHF 1.165 trillion, more than 150% of Switzerland’s GDP. Reforms implemented in 2020, reduced the hole to CHF 909 billion. Then reforms in 2022, known as AVS 21, brought the funding gap down to CHF 654 billion, roughly 90% of GDP. Funding is now probably ensured until 2030, reckons UBS. However, beyond this date the money deducted from the incomes of those working is unlikely to cover the money going to support those no longer employed.
Under the fourth scenario set out by UBS, the retirement age would be set at 66 from 2029 to 2034 and then rise annually by any expected increases in life expectancy. By 2070, the projected retirement age would be 68.2. This change would leave Switzerland’s state pension system with a moderate surplus of CHF 100 billion, 13.4% of GDP (2019), projects the bank.
The current retirement age (officially the reference age) in Switzerland is 65 for men and 64 for women, although it will soon be 65 for women after a slim majority of voters approved the rise.