What you need to know

Basic state pensions typically refer to government-provided pensions that are designed to provide a basic level of financial support to individuals in their retirement. These pensions are often funded through a combination of contributions from individuals during their working years and general government revenues.

Key features typically include:

Age eligibility – Individuals are generally eligible to receive a basic state pension once they reach a certain age, which varies by country. In many cases, this age is around 65 or older.

Contribution based – Some state pension systems are based on the contributions individuals make during their working years. The amount of the pension is influenced by factors such as the number of years of contributions and the individual’s earnings history.

Means tested – In some countries, eligibility for a basic state pension may be means-tested, meaning that individuals with higher incomes or substantial assets may receive reduced or no pension benefits.

Universal Pension Schemes – Some countries operate universal or national pension schemes that aim to provide a basic income to all eligible citizens, regardless of their income or employment history.

Indexation – Pensions may be adjusted periodically to account for inflation, ensuring that the purchasing power of the pension remains relatively stable over time.
Survivor Benefits – In many pension systems, provisions are made for the spouse or dependents to receive benefits if the pensioner passes away.

Swiss State Pension system

Switzerland introduced its first state pension system in 1948. The Old Age and Survivors’ Insurance (OASI) was established as part of the social security system to provide a basic pension for retired individuals and survivors. It is one of the three pillars of the Swiss social security system, along with disability insurance and income compensation.

As with almost all state pension systems in Western Europe, there is a significant funding issue due to an ageing population.

The Swiss government recognised this some years ago and proposed legislation to remedy the problem. These changes, which of course first needed to be approved by Swiss voters, will take effect from 1st January 2024 and are known as the AVS21 Reform or AHV 21 Reform, depending on which part of Switzerland you live in.

The aim is to secure the financing of the OASI insurance scheme for the next 10 years and, not surprisingly in a country like Switzerland, (which until relatively recently had a bicycle tax to provide compensation for injuries), it has been costed and is being paid for by a small increase in VAT.

There are several key features of the legislation, but the most obvious one is the increase in the normal retirement age (known as the ‘Reference Age’) for women from 64 to 65, bringing the retirement age in line with that of men.

At the same time, (and this has been less talked about), retirement will be made more flexible, and compensation measures will be introduced for women in the transitional generation.

Additional changes

Flexible retirement
From January 1, 2024, it will be possible to draw an old-age pension from any month between the ages of 63 and 70 (62 for women of the transitional generation). It will also be possible to apply for a partial or full pension. These changes will make it easier to leave working life gradually.

Continuing to work after the reference age
Under certain conditions, people who continue to work after the reference age will be able to improve their retirement pension, if it is below the maximum pension.
This means that, depending on the circumstances, it may be more attractive to continue working after the reference age, in view of the amount of your retirement pension.

Transitional generation and compensation measures
The first stage in the harmonization of the retirement age for men and women at 65 will not begin until January 1, 2025. The increase in the reference age for women from 64 to 65 will take place in annual increments of three months from 2025, starting with women born in 1961.

To mitigate the impact of the reform on women nearing retirement in 2024, compensation measures have been introduced for the transitional generation (women born between 1961 and 1969). Women of the transitional generation who anticipate their retirement pensions will benefit from special anticipation rates that are lower than ordinary rates. Their pensions will therefore be less severely reduced for life. What’s more, they will still be able to apply for early retirement at the age of 62. Women who do not apply for early retirement will receive a pension supplement for life.

A useful explanatory video, in English, can be found here.

Pension Planning
Navigating the maze of the Swiss pension system can be confusing, but given the importance of long term pension planning, it is essential to take professional advice from a pensions expert.

Make an appointment now

At Blackden Financial we have been advising our clients in Switzerland for the past two decades on just such decisions, so for a no obligation meeting call, +41 22 755 0800, by e mail info@blackdenfinancial.com or complete our Contact Form here

One of our team will contact you and arrange a suitable time to discuss how our service can work for you, and how to get the ball rolling.