The Swiss parliament has agreed only a partial funding plan for the new 13th annual state-pension payment, reported RTS. After lengthy wrangling, the National Council backed an increase in value-added tax (VAT) but rejected higher payroll contributions, leaving much of the additional cost uncovered.
The National Council voted to raise VAT by 0.4 percentage points. The shift was made possible by a change of position from the Green Liberal Party, which had previously opposed a permanent VAT increase.
The standard VAT rate will rise from 8.1% to 8.5%, while the reduced rate for hotels will increase from 3.8% to 4%. The lower rate of 2.6% applied to essentials such as food and medicines will remain unchanged.
Lawmakers narrowly rejected a proposal to raise payroll contributions by 0.2 percentage points. That measure had formed part of a compromise negotiated between the two chambers of parliament. Without it, the approved VAT increase covers only around half of the cost of the 13th pension payment.
What options remain for the rest?
The Federal Council had prepared contingency plans in case parliament approved no funding at all. These included a larger VAT increase or a combination of higher VAT and payroll contributions. Neither chamber appears willing to support them at present. Whether the government will devise a new financing package remains unclear.
Will voters have the final say?
Almost certainly. Following the Green Liberals’ change of heart, the VAT increase is expected to pass parliament’s final vote. Because it requires a constitutional amendment, it must then be approved by both voters and cantons in a referendum, likely in November.
What does this mean for pension payments?
The first 13th pension payments are due this December and will cost about CHF 4.2bn. Even if voters approve the VAT increase in November, businesses will need time to adjust prices and systems. As a result, the pension supplement will be paid for roughly two years without dedicated funding. That gap could amount to about CHF 9bn. From 2028 onwards, the approved VAT increase would still cover less than half of the programme’s cost.
The funding gap poses a growing challenge for the pension system. Strong stockmarket returns have masked some of the strain, but a shrinking asset base would reduce future investment income. An ageing population is adding to the pressure, increasing the number of pensioners relative to workers. The longer the imbalance is left unaddressed, the more expensive it is likely to become to fix.
The decision to expand pension benefits before identifying a sustainable source of funding looks increasingly imprudent.
More on this:
RTS article (in French) – Take a 5 minute French test now
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