Swiss Parliament Reaches Compromise on 13th AHV Pension Financing

After months of negotiation, a compromise has been reached regarding the financing of Switzerland's 13th AHV pension. The agreement, put forth by a conference of delegates, aligns with the center-left majority's proposal in the Council of States. This plan involves increasing both the value-added tax (VAT) and wage contributions to fund the pension expansion.

The National Council had initially favored a VAT-only increase to distribute the financial burden more evenly between earners and retirees. However, the compromise sees the center-left concede slightly to the other bourgeois parties. The increase in wage contributions will be smaller than initially planned, rising by 0.2 instead of 0.3 percentage points. This adjustment reduces the additional burden on employees and employers from 1.5 billion to 1 billion Swiss francs annually.

Conversely, the agreement maintains the Council of States' plan for the VAT increase. The standard VAT rate is set to rise by 0.4 percentage points, a move estimated to cost consumers and businesses approximately 1.5 billion Swiss francs per year. A significant point of contention resolved in favor of the center-left alliance is that the additional revenue for the AHV will be permanent, not temporary, countering the desire of parties like the SVP, FDP, and GLP for a short-term solution to maintain pressure for further reforms, such as raising the standard retirement age.

The Council of States is scheduled to vote on the compromise proposal on Thursday morning, with the National Council to follow next week. The process is delicate; if either chamber rejects the compromise, the 13th AHV pension will be implemented without a funding mechanism. Approval from both chambers is required for the final vote later in the summer session. While the Council of States is expected to approve the measure, the National Council vote is anticipated to be very close, as the center-left and their allies do not hold a clear majority.