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PENSIONS

What is Switzerland’s 13th-month pension plan and why are they voting on it?

A recent poll has shown that the overwhelming majority of Switzerland’s population wants the government to introduce the 13th- month pension plan. What is it and how would retirees benefit from it?

Published: 27 July 2023 11:52 CEST
What is Switzerland's 13th-month pension plan and why are they voting on it?
Many retirees would benefit from the 13th pension, referendum committee says. Photo: Pixabay

Nearly 70 percent of Switzerland’s population are in favour of extending the first-pillar state pension over 13 months, according to a survey carried out by Tamedia media group. 

The proposal, brought about by left-wing parties and trade unions, seeks to base the first-pillar  pension (AHV in German and AVS in French and Italian) on the the 13-month salary system practiced by most Swiss employers.

This means that annual earnings are calculated on, and paid out in, 13 instalments rather than 12.

The idea behind this system is that the 13th instalment paid out in December (in effect, two months’ salary) will help pay for Christmas expenses and other end-of-year bills.

READ ALSO : What is the 13th-month salary in Switzerland and how is it calculated?

Spreading the AHV / AVS  benefits over 13 months would increase first-pillar pensions by 8.33 percent, supporters say.

‘Not sustainable’

The push toward the 13th pension is not new; it  has been debated by MPs  for a while.

Earlier this year, both chambers of the parliament voted against the proposal, claiming that an increase in the first-pillar pension would not be financially sustainable in the long term. The additional expenditure would reach 5 billion francs by 2032, MPs said.

In response, supporters of the new system collected over 137,000 signatures —37,000 more than required by law —  to bring this issue to a national vote.

This move is necessary to compensate financially-strapped retirees for the higher cost of living, Social Democratic Party, which spearheaded the campaign, explained on its website.

“Rents and health premiums are rising, and pensions no longer cover essential expenses,” the party said. 

The additional 8.33 percent that would be generated by the 13th payout, would  benefit those who need it most: low and middle income retirees, supporters point out.

More pension woes

They also argue that the hike is even more necessary now, as second-pillar occupational pensions are at risk of decreasing by about .08 percent.

That’s because Switzerland’s rising life expectancy — one of the highest in the world — is weakening the pension system, with the government saying the only way to protect the second-pillar scheme is to reduce payouts.

READ ALSO: Will you be able to live comfortably on your Swiss pension?

This issue will be decided on at the ballot box on March 3rd as well, when both pension-related reforms will be voted on.
 

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For members

HEALTH INSURANCE

How Switzerland’s two crucial health insurance referendums could impact you

The price of Swiss health insurance premiums has been rising significantly in the past few years, prompting political parties to launch two cost-cutting initiatives. The votes will take place in June and there's a lot at stake.

Published: 24 April 2024 15:33 CEST
Updated: 28 April 2024 08:44 CEST
How Switzerland's two crucial health insurance referendums could impact you

On June 9th, the Swiss will cast their votes on two issues aiming, though in different ways, to curb the continually increasing cost of the obligatory health insurance (KVG / LaMal).

This is what’s at stake.

The ’10-percent’ initiative

In view of the high (and rising) premiums and other costs of living, which eat up a big chunk of the budgets of low- and middle-income consumers, the Social Democratic Party has spearheaded a national vote to cap the insurance rates at 10 percent of income.

Anything over this limit should be paid for by the federal and cantonal government, the party says.

While this strategy may sound enticing to everyone tired of paying high premiums, the government warns that while this proposal looks good on paper, the ‘yes’ vote could unleash some serious consequences.

Its main argument is that this measure would cost several billion francs per year, and does not provide any incentives to control health costs.

Instead, the Federal Council and the parliament have concocted their own ‘counter initiative’ that they want voters to approve.

Under this proposal, cantons will have to increase the amount of financial help they pay toward health premiums for low-income people. 

READ ALSO: How do I apply for health insurance benefits in Switzerland?

‘For Lower Premiums’ initiative

For its part, the Centre party has come up with its own proposal to reduce health insurance costs, which will also be voted on June 9th.

It provides for a ‘brake’ on health costs, which should evolve according to the economy and wages.

This brake would work in the same way as the federal spending brake. Therefore, when healthcare costs exceed wages for a given year by 20 percent, the government must take action to bring the  costs down.

The government is asking voters to turn down the Centre’s proposal because it doesn’t take into account factors such as demography, technological progress in healthcare, as well as the dependence of salaries on economic developments.

Here too, the Federal Council and parliament have put out their own counter-project, providing for more targeted measures, including specific cost control objectives for healthcare services.

Are there any other proposals on the table aiming to curb the cost of insurance premiums?

Yes.

While they are not on the ballot, two ideas have been debated in past months.

One calls for scrapping multiple private carriers  in favour of a government-run single health insurance scheme, similar to that in the EU. 

The other idea floating around is to replace the current system where rates are determined by factors such as age and canton of residence, and base them on wages instead. 

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