Swiss to vote on raising retirement age to 66: a visionary idea or an unwelcome plan?

The statutory retirement age is once more being put to a referendum. On March 3, the Swiss people will vote on a popular initiative, put forward by the Young Radical-Liberals, aimed at raising the retirement age and pegging it to life expectancy. A number of other countries have already gone down this road.

Just over a year after agreeing to raise the retirement age for women from 64 to 65, the Swiss will go to the polls on March 3 to decide whether to push it back to 66 for all.

If the proposal is accepted, Switzerland will be following the trend seen in the countries of the Organisation for Economic Co-operation and Development (OECD), where the average retirement age is set gradually to increase to 65.7 for women and 66.1 for men by 2060, according to the body’s Pensions at a Glance report.

The retirement age for women in Switzerland went up on January 1, 2024, as part of a progressive, four-stage increase to 65. This is the result of a reform of the old-age and survivors’ insurance scheme (known as the AHV/AVS), the first pillar of the Swiss pension system, which was approved by the electorate in a federal referendum in September 2022.

Two months after this first change came into force, the issue will be back on the table. In March, voters will cast their ballots on a federal popular initiative, submitted by the centre-right Young Radical-Liberals in July 2021 with 145,000 signatures.

The initiative “for a secure and sustainable old-age pension scheme” proposes gradually increasing the statutory retirement age for women and men to 66 by 2033. After that, it would be pegged to life expectancy. In other words, it would be raised automatically if life expectancy increased, and vice versa.

Specifically, the text proposes raising the retirement age by 80% of any increase in life expectancy. Thus, if life expectancy goes up by one month, the retirement age will rise by 0.8 months. The goal of the initiative’s promoters is to enable people to spend around 20% of their lives in retirement. Following this formula, retirement at 67 would come about by 2043 and retirement at 69 in 2070.

Although it has been taken up by the Young Radical-Liberals, this solution for closing the public pension funding gap is not new. The Conservative Democratic Party proposed it in 2012 in a motion that was rejected by the senators.

What impact would the initiative have on state pension funding?

In 2022, the old-age insurance scheme closed its books with a profit of CHF1.6 billion ($1.8 billion) and assets of CHF47 billion. Its finances have thus stabilised for the moment. This is partly thanks to the reform measures, known as AHV/AVS21, adopted in 2022 and the federal act on tax reform and pension funding passed in 2019, which led to a drop in expenditure and increase in revenue.

In the medium term, however, state pension funding is not guaranteed, as the scheme is facing a structural problem. The number of people receiving a pension is increasing faster than those in gainful employment, and as life expectancy increases pensions need to be paid for longer. According to projections by the Federal Social Insurance Office, the AHV/AVS will be in deficit from 2031.

Raising the retirement age to 66, as called for by the initiative, would enable a saving of around CHF2 billion by 2030, again according to the Federal Social Insurance Office. Pension funding would thus be guaranteed at least until 2033.

What are the main arguments for the initiative?

The state pension scheme urgently needs to be put on a sustainable footing, the Young Radical-Liberals argue, to prevent it from collapse. The party presents its text as the solution to guarantee long-term financing, without cutting pensions or adding taxes.

The initiative’s promoters also believe that linking the retirement age to life expectancy would help depoliticise the issue, by creating an automatic mechanism for adjusting the benchmark age.

As we live longer, we also have to work longer to pay for our pensions, the Young Radical-Liberals say. Other Western countries have already taken this step, they argue.

According to the federal government, pension funding is currently guaranteed for the next ten years or so. Measures will certainly need to be taken to ensure long-term financing. However, the Federal Council – the executive body – is already drawing up a plan to stabilise the AHV/AVS for the 2030 to 2040 period, which it will submit to the parliament in 2026.

The government also argues that the demographic problem facing the old-age provision system cannot be resolved solely by raising the retirement age. Other measures are needed, including additional funding.

The idea of pegging retirement age to life expectancy has not won over the authorities either. In their view, an automatic mechanism of this kind would not take sufficient account of the actual situation on the labour market – particularly that of older people – or the social situation.

It would moreover not be compatible with the Swiss political system. By enshrining the retirement age in the constitution, the government, the parliament and the people would lose the necessary flexibility to take other criteria into consideration.

The Radical-Liberal Party supports the initiative of its youth section, but it stands alone in this. The other government parties oppose it. The government and a large majority in the parliament are also recommending voters to reject it. Unsurprisingly, the business community is in favour of the initiative, while the trade unions are against it.

A number of European countries have already opted for more or less automatic mechanisms to link the retirement age to changes in life expectancy, as laid out in a report by the interior ministry. These include Sweden, Denmark, Finland, Portugal, Italy, the Netherlands, Greece, Bulgaria and Estonia.

The systems put in place in the different countries have different features, however, and the experience gained so far is limited, meaning it is early days to draw conclusions. 

Portugal and Italy are the only countries whose retirement age has actually been raised by an automatic mechanism. In Portugal, it has increased by just a few months and currently stands at 66 years and four months. In Italy, meanwhile, the introduction of this mechanism led to a steep hike in the retirement age: from 60 in 2012 to 67 today.

Swiss to vote on raising retirement age

Working until 65 – what is the origin of this retirement age?

The retirement age was set at 65 when the old-age and survivors’ insurance (OASI) was introduced in 1948. The figure has remained the same in Switzerland for decades and is not arbitrary.

Matthias Hug

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At least for men, the retirement age has not changed since it was introduced 80 years ago. However, the number 65 did not fall from the sky back then, says Christian Koller, director of the Swiss Social Archives. Rather, it was an international trend at the time.

Germany had already introduced pension insurance at the end of the 1880s. The age of 70 was then lowered to 65 at the beginning of the 20th century. The situation was similar in Great Britain: before the First World War, the limit was 70, until it was lowered to 65.

What is reasonable? How long can people work?

However, the noble idea of enabling working people to enjoy a peaceful retirement did not play a role in setting the retirement age. Instead, the focus was on the question of how long a worker would be productive for the economy. "What is reasonable? How long can people work?" explains Christian Koller.

And they came to the conclusion that people could work efficiently until around 65. As a result, the OASI in Switzerland was reformed several times. An increase in the retirement age was initially never an issue, says Martin Lengwiler, history professor at the University of Basel.

When the OASI was founded, it was a very meagre insurance scheme.

These reforms have always been about expanding the OASI. "When the OASI was founded, it was a very meagre insurance scheme. It paid very small pensions below the minimum subsistence level. This was a socio-political problem until the end of the 1970s. In this context, raising the retirement age was not discussed at all. If anything, it was about lowering the retirement age. And that's what they did for women."

Apart from these adjustments, the retirement age in Switzerland has remained the same for decades, which is unusual when compared internationally, says Christian Koller.

"The debate has come up again and again, of course also from the point of view of financing. In other words, the longer people live, and still retire at the same time, the more it costs. However, a general increase in the retirement age has never been included in a proposal. Because that would have had a difficult time at the ballot box."

Discussion about retirement age takes centre stage again

Recently, however, the aspect of how the OASI should be financed in the future has reignited the debate about the retirement age. Life expectancy in Switzerland is increasing. The increasing number of pensioners who receive OASI are faced with fewer and fewer working people who pay into the OASI.

The argument of financing already played an important role when the women's retirement age was adjusted to 65 in 2022. Jus like now with the Pensions Initiative put forward by the Young Radical-Liberals, which aims to raise the retirement age for both genders. The difference is that this is the first attempt to set a retirement age of over 65. If this succeeds, it would be historic for Switzerland.

What is the origin of the retirement age?

On March 3, the Swiss will be voting on two initiatives related to our old-age and survivors’ insurance (OASI): a 13th OASI pension payment and an increase in the retirement age. To help you understand the two proposals, this episode of the RTS programme Point J takes a look at the basics of how the OASI works. Guest of the episode is Daniel Leuba, director of the Vaud cantonal compensation office.

In Switzerland, the first OASI pensions were paid in 1948. Since then, all Swiss workers have contributed to the old-age and survivors’ insurance (OASI), and benefit from it at the end of their careers. Currently, 5.3% of an employees' salary is deducted each month. Employers add the same amount. But where does this money go? How is it managed? Daniel Leuba, director of the Vaud cantonal compensation office, answers these questions in the RTS programme Point J.

In 1948, there were more than six contributors for one pensioner, in 2024, it's three contributors for one pensioner, and by 2050, according to our projections, there will be two contributors for one pensioner.

According to Pro Senectute, 26% of people in Switzerland continue to work after retirement age. This is often the case for people with low incomes, the majority of whom are women and people who are self-employed. Rainer will be 67 in two weeks' time. He works as a professional photographer for companies and in advertising. In this episode, he explains why he is continuing to work.

Julien Furrer

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How does the OASI work?

Should the retirement age be raised?

How pension schemes work in other countries

Once again, Switzerland is voting on the future of its pension scheme. On March 3, the introduction of a 13th OASI pension payment and the Pension Initiative will be up for debate. But how do other countries provide for their pensioners?

Germany: Like the Swiss, the German pension scheme is based on three pension pillars. Employees are obliged to pay into the statutory pension fund. In addition, there is a (voluntary) company pension scheme (similar to the pension fund) and private pension provision (our third pillar). The statutory pension insurance works according to the pay-as-you-go system: those who are currently paying into the scheme finance the pensions of current pensioners. There is a significant difference to Switzerland: in our northern neighbour, the regular retirement age will be raised to 67 by 2031.

France: France also has three pillars (basic pension, occupational pension provision, private pension provision). Here, too, the system is suffering from an ageing society. The pay-as-you-go system also applies. What is paid in is therefore directly paid out again. Special feature: Many professional groups have their own pension funds - there are 42 in total. Some of the special funds offer their insured members privileges, such as an earlier retirement age. After months of protests, President Macron's pension reform, which will gradually increase the retirement age from 62 to 64, came into force last September.

Italy: Italy's statutory pension scheme is financed through wage deductions on a pay-as-you-go basis. In order to receive the full statutory pension, Italians must have reached the retirement age of 67 in addition to a contribution period of at least 20 years. Unlike in Switzerland, the amount of the pension in Italy is not capped.

UK: Here, too, there are three main pension types (State Pension, workplace pensions, personal pensions). There is also a property pension, in which loans are secured by the high increase in property values over the last 20 years. The pension is financed on a pay-as-you-go basis. The retirement age in Great Britain is currently 66.

Netherlands: The pension system in the Netherlands is based on a mix of a pay-as-you-go pension from the the state pension, pension funds and individual pension products. The retirement age is currently 68 and is regularly adjusted in line with rising life expectancy.

US: The so-called "Social Security" is financed by a pay-as-you-go system. In addition to entitlements to retirement benefits, pension insurance in the US also guarantees access to medical care through public health insurance for older or disabled people.

Sweden: Pension provision in Sweden is based on a mix of pay-as-you-go and capital cover – contributions are invested in the capital market and repaid at the end of the insurance period. In addition to an income pension, for which 16% of the salary is deducted each year, there is also a premium pension, for which 2.5% of the income is deducted each year. Swedes can choose whether to place this money in certain funds or leave it in the fund selected by the state.

Claire Micallef

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Retiring in other countries

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