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RETIREMENT

What is Switzerland’s retirement age – and will it rise?

Questions relating to pensions and retirement have been frequently debated in Switzerland in the past years, both among the population and at the legislative level.

Published: 24 February 2023 12:38 CET
What is Switzerland's retirement age - and will it rise?
(Image by Eddie K from Pixabay)

Retirement is a hot-button topic for everyone who works in Switzerland.

It is all the more relevant, since the ‘Worry Barometer’ — an annual survey of concerns that preoccupy Switzerland’s population the most in any given year — consistently shows that pensions, and having enough money for retirement, are among the top worries.

And there is a good reason for that: as more people live longer (especially in Switzerland, which has one of the world’s highest life expectancies), continuing to fund first-pillar state pensions (AHV in German and AVS in French and Italian) is a major challenge. 

The government is tackling this problem in various ways.

One is increasing the VAT rates.

From January 1st, 2024, these rates will increase as follows:

  • The standard VAT rate will rise from 7.7 percent to 8.1 percent
  • The reduced VAT from 2.5 percent to 2.6 percent
  • The special rate for hotel accommodation goes from 3.7 percent to 3.8 percent

Another way to ensure that the current level of benefits is maintained is increasing the retirement age for women.

Right now, men in Switzerland retire at 65, while since 1997 women stop working at 64. Prior to that year, they retired even earlier, at 62 — no wonder the AHV / AVS scheme has been running a deficit since 2014.

However, starting in 2025 and until 2028, Switzerland will gradually implement the same retirement age for women as for men — 65 — a move that is expected to boost coffers of the old-age pension scheme.

Both VAT and higher retirement age, by the way were approved by Swiss voters in referendums.

READ MORE: OPINION: Switzerland can no longer justify a lower retirement age for women

Today, women work until 64 but that is about to change. Photo: Vlada Karpovich on Pexels
 

However, the new retirement age is not written in stone: the government is open to upping it to 70 in certain cases

The Federal Council has accepted a motion from MP Ruth Humbel, who proposed to set the retirement age based on the duration of each individual’s professional activity.

The current calculations for a monthly AHV / AVS pension are based on a person working full time, and contributing to the scheme for 44 years — that is, from age 21 to 65.

This means that people who started working later would not receive full pension.

However, Humbel’s proposal postulates that if someone started their professional career later— say at 26 — they would continue to work until 70, and receive the full first-pillar pension, which is currently 2,450 francs a month, but set to go up to 2,464 francs in July when it is adjusted for inflation.

The lowest AHV / AVS pension, on the other hand, is currently 1,225 a month, to increase to 1,232 in July.

Keep in mind, however, that these are the current amounts of the first-pillar pensions (Switzerland has a total of three, see the link below). As they are typically adjusted for inflation once a year, the amount could be different when you retire.

READ MORE: EXPLAINED: How does the Swiss pension system work – and how much will I receive?

Pensions are adjusted for inflation. Photo: Claudio Schwarz on Unsplash

What else should you know about retiring in Switzerland?

For many people, being able to afford life in Switzerland once they no longer work is a huge concern.

If you receive all three pillars mentioned above, then you probably can live comfortably after retirement.

It also helps if you have savings to fall back on.

A UBS study carried out in 2021 showed that while still working, a person over the age of 50 in Switzerland must set aside 14 percent of their income for retirement. (These days, given the current inflation level of nearly 3 percent, this amount is likely higher). 

This means that if, for instance, you earn 100,000 franc a year, 14,000 francs should be saved for 15 years, which in the end will give you a nice nest egg of 210,000 francs.

Of course, these figures should be adjusted down or upwards, depending on your income.

READ MORE: How much should you save for a ‘comfortable’ retirement in Switzerland?

This is actually quite good because the same UBS analysis found that “in some countries, much higher private savings rates than in Switzerland are necessary to maintain living standards in retirement”.

As an example, Italians must put aside 28 percent of their money for their retirement, Germans 30 percent, and the French 44.

In the United States, people must save 42 percent of their income to live comfortably after they retire.

Of the 24 surveyed countries, pensioners in Nigeria (145 percent), Russia (108 percent) and Japan (102 percent) fare the worst.

These articles will provide more information about retiring in Switzerland:

EXPLAINED: Everything you need to know about retiring in Switzerland

Reader question: Can I take my pension money with me when I leave Switzerland?

EXPLAINED: How to get a visa to retire in Switzerland

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PENSIONS

EXPLAINED: Can I work past the retirement age in Switzerland?

While many people in Switzerland look forward to spending their retirement years exploring their local area or researching their family tree, others may return to work to boost their retirement income. Here’s what you need to know if you plan to work past your retirement age.

Published: 15 September 2023 17:30 CEST
EXPLAINED: Can I work past the retirement age in Switzerland?

Switzerland has a flexible approach to retirement and many retirees opt to work either part-time or on a freelance basis.

Yet, there are certain conditions and limitations to consider.

Here’s everything you need to know when it comes to working in your retirement years.

Who can work after retirement in Switzerland?

Every retiree residing in Switzerland can continue to work or return to their job after enjoying some of their retirement so long as their employer agrees.

In Switzerland, your employment contract automatically ends once you reach the retirement age – usually 65 for men and 64 for women.

This means that if you will need your employer’s consent to stay on with your company if you are not quite ready to retire.

Generally, it is advised to plan your past-retirement work life in advance – ideally around six months before retiring – so that your current or future employer can also get organised.

Also note that Switzerland has no upper age limit dictating how long an employee can work. You will have the option to work as long as you wish, provided that your employer is willing to continue employing you and you are physically and mentally capable of doing the job.

READ MORE: How does the Swiss pension system work – and how much will I receive?

What happens to my benefits?

If you choose to work again after having enjoyed your retirement years for a bit, rest assured that you will continue to receive your AHV / AVS pension, and your pension fund benefits while you work.

Your new salary will just be an added bonus in that case.

If you happen to earn more than a gross salary of 1,400 Swiss francs per month, however, you will need to pay into your AHV / AVS again.

Those earning salaries larger than 1,400 Swiss francs per month are required to make social security contributions, but this does not result a larger pension, which makes working beyond the reference age less appealing for many.

What happens if I work as a freelancer?

If you choose to freelance in Switzerland, it is important to remember that Swiss law does not recognise the term freelancer, but instead distinguishes between self-employed and employed work.

But while all freelancers in Switzerland are self-employed, not all self-employed people are freelancers. The latter usually have more structured business models, while the former are more “free” in their activities (hence the term “freelancer”), handling multiple projects and clients at once, often without the need for a physical office.

Legally speaking, however, both are pretty much the same.

As a self-employed person in Switzerland, you will be required to make social security (AHV/IV/EO) contributions at a maximum rate of 10 percent of your income if your wages exceed the monthly 1,400 Swiss francs.

READ MORE: Freelancing in Switzerland: What foreign nationals need to know

Will my wage stay the same as an employed person?

The freelancing option

If you would like to keep working for the same company after retirement, but with lower financial burden, propose to your boss that you will continue to do your job, but as a freelancer rather than a ‘regular’ employee.

Why is this more beneficial to you?

As an independent contractor, you will be responsible for paying AVS / AHV contributions yourself. Since social contributions of self-employed persons are a bit lower after retirement, this arrangement will be more advantageous tax-wise.

Will I still be insured against accidents and illness?

Yes, but you must work at least eight hours per week to benefit from accident insurance.

Read more on the topic in The Local’s article here.

Should I expect higher taxes if I continue to work past the retirement age?

If you combine your wage with your pension your overall income will increase and hence result in higher tax payments.

You can avoid this by deferring your AHV pension for up to five years.

According to Swiss insurance company Pax, if you push your AHV / AVS pension back a year, it increases by 5.2 percent, and 31.5 percent if you push it back the maximum five years.

Will I receive more benefits if I continue to pay into the pension fund?

Yes.

Employees who work past their retirement age and continue to pay into their pension fund will as a result accumulate more money and receive higher benefits later in life.

Am I entitled to unemployment benefits if I am laid off in my retirement years?

The short answer is no.

If you are let go in your retirement years, you will receive your AHV / AVS pension alongside your pension fund benefits, as well as the money from Pillar 3a as you would without continuing to work past 64/65.

READ MORE: What is Switzerland’s retirement age – and will it rise?

What happens to my pension fund?

As of this year, Switzerland still does not have a uniform regulation when it comes to deferring one’s pension.

This means that not every pension fund will allow you to defer your pension after you reach the retirement age.

Should your pension fund not allow you to defer your pension, you will be entitled to your pension while you continue to work and will no longer be required to pay in pension fund contributions.

If your pension fund allows you to defer your pension beyond the normal retirement age, you will need to pay in a contribution from your wage as a normal employee would depending on the amount you earn.

Likewise, currently most pension funds that do allow you to defer expect you to defer for at least a year and a maximum of five years.

If you do plan to defer, you will need to request the deferral no later than one year after reaching the normal retirement age.

You may also withdraw your Pillar 3a up to five years after the normal retirement age if you continue to work. However, you must then withdraw the money and can no longer postpone the date.

AHV 21 reform restructures pension system from 2024

This is set to change on January 1st, 2024 when Switzerland’s AHV 21 reform, which was approved by the Swiss people on September 25th, 2022, comes into force.

From then on, every pension fund in Switzerland will have to allow an individual to defer their pension beyond the normal retirement age or as it will then be known, their ‘reference age’.

The new reference age also raises the age for women to 65 from 64.

Once the new reform comes into force, AHV / AVS contributions paid in by working employees aged 65 and over will count towards their pension and boost their AHV / AVS pension in old age.

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