AHV revision: AHV 21 reform comes into force on 1 January 2024

Background
The revision of the AHV represents an important step in adapting the Swiss social insurance system to current demographic and economic challenges. The revision is an expression of the constant endeavour to find a balance between the financial sustainability of the system and ensuring adequate benefits for the beneficiaries. On 9 December 2022, the Federal Council set the entry into force of the AHV 21 reform for 1 January 2024. The reform includes an amendment to the AHV-Act and the federal decree on the additional financing of the AHV through an increase in value-added tax.

Overview of the changes

1. Harmonisation of the reference age for women to 65

The term “retirement age” will be replaced by the term “reference age”. The reference age for women will be raised to 65, whereby this will be gradually increased by 3 months per year. The reference age for men and women will therefore be completely equalised in 2028. The increase applies analogously to occupational pension provision. Women who are about to retire are particularly affected by this transition phase. For this reason, those born between 1961 and 1969 will receive lifelong pension supplements as a compensatory measure, provided they do not draw their pension early. Furthermore, the extra payment is not subject to the capping of retirement pensions for married couples and does not result in any reductions in supplementary benefits. The supplement is paid even if the maximum pension has already been reached.

2. Flexible pension withdrawal

Those who take early retirement today can only draw their pension either one or two years in advance and the full pension must be drawn in each case. The pension can now be drawn or deferred from any month between the ages of 63 and 70, and from the age of 62 for women of the transitional generation. It is now also possible to draw only part of the pension. The minimum amount for early withdrawal or deferral of part of the pension is 20 %, the maximum
80 %.

3. Incentives to work beyond the reference age

Anyone who works beyond the reference age currently pays no contributions up to a gross salary of CHF 1,400 per month. Salaries above this allowance are subject to contributions, but do not lead to a higher retirement pension.  After the AHV 21 reform comes into force, the tax-free allowance can now be waived voluntarily. In addition, contributions paid after the age of 65 will be taken into account for the calculation of the pension upon request.

4. Additional financing with the help of VAT

On the one hand, raising the reference age generates savings for the AHV. The second major pillar of AHV financing is VAT. This additional revenue for the AHV will be generated by increasing VAT. The following VAT rates will therefore apply from 1 January 2024: The standard rate will now be 8.1 % (previously 7.7 %), the special rate for accommodation will rise to 3.8 % (previously 3.7 %) and the reduced rate will now be 2.6 % (previously 2.5 %).