For over two decades, Switzerland's most important social welfare organization did not undergo any significant changes. The AHV 21 reform is now imminent. Approved by voters in the fall of 2022, it is intended to maintain the level of AHV pensions and secure the financing of the AHV until 2030. The reform is a milestone with consequences for employees and employers alike.
Action is required from companies at various levels. This is because the reform introduces a bundle of measures which, first, regulate the level of VAT and, second, bring changes to the 1st pillar (AHV) and 2nd pillar (BVG). The most important change is the increase in retirement age for women, to 65.
These are the core points of the AHV 21 reform:
- Uniform reference age: The reference age for both men and women is now 65. Anyone who retires before then must expect pension cuts. Conversely, people who work longer will receive a pension supplement. The reference age of 65 is decisive for AHV and occupational retirement provision and will be incrementally introduced.
- Incremental increase: The increase in retirement age for women from 64 to 65 is being introduced over four years in three month increments, starting in 2025 (see chart). Those born in 1960 and before are not affected. The transitional generation (1961 to 1969) will receive pension supplements for life, provided they do not draw their retirement pension early. This equalization measure serves to secure the pension level.
|Année de naissance
|up to 1960
|64 years of age
|64 years, 3 months
|64 years, 6 months
|64 years, 9 months
|65 years of age
- Flexible retirement: The time at which people are able to draw their pension is becoming more flexible. Women and men between the ages of 63 and 70 can draw their retirement pension from any month – and can even do this in stages if they wish (partial retirement). Women belonging to the transitional generation (1961-1969) can begin drawing their pension at 62, but can also choose to defer this to a later date.
- Optimized pensions: AHV contributions paid in after the 65th birthday are now included in the pension calculation. This makes the prospect of working past the reference age more attractive: in this way, contribution gaps can be closed and the AHV pension can be increased. Until now, people who worked longer than the mandatory period did not directly benefit from this, despite the fact that they continued to make AHV contributions.
AHV reform: key points for employers
The AHV reform gives employees more flexibility in their retirement planning. This not only benefits them, but also employers – in particular with regard to the skills shortage and the retirement of the baby boomer generation: employees can stay in companies for longer, because working beyond the reference age is now rewarded. In addition, female employees will work one year longer, which can further alleviate staff shortages.
For employers, this means: offering part-time work or job shares. With flexible working models like this, transitional phases can be optimally utilized and key personnel can pass on their expertise and specialist knowledge in a targeted way. In addition, the diversity of employment models increases a company's attractiveness on the labor market.
The changes brought by the AHV reform also require employers to make certain adjustments. Here are the most important points:
- Review your regulations and contracts
Important documents like employee handbooks, guidelines and employment contracts must be reviewed and updated. If any of these documents detail fixed ages or specific years for retirement, you should adapt the wording accordingly.
- Review the conditions of your pension fund
The reference age of the BVG is now 65 for both men and women. In addition, there is now the option for employees to draw on their pension early or defer their retirement. As is the case with the AHV, this can be done at any time between 63 and 70. Taking an early withdrawal from the age of 58 is still an option within the framework of the pension fund regulations. However, it is only possible to defer retirement benefits beyond the reference age if employment is continued. Pension funds must now offer the insured the option of gradually drawing a minimum of 20 percent of their retirement benefits. Pension funds must allow the pension to be drawn over a minimum of three distribution stages. If the retirement benefit is drawn in the form of a lump-sum payment, the number of stages is limited to a maximum of three.
- Make the necessary VAT adjustments
VAT rates must be increased within the systems. The standard rate is now 8.1 percent, the reduced rate 2.6 percent and the special rate 3.8 percent. The previous rates apply to services rendered up to and including December 31, 2023, while the new rates shall apply to services rendered from January 1, 2024. It is advisable not to issue invoices that cover both years.
Pension fund capital withdrawal: avoid high tax burdens
The AHV 21 reform also has consequences for capital withdrawals from the pension fund: Insured persons must now withdraw their entire capital from the 2nd pillar in the year of their retirement, be that pension fund capital or capital from vested benefits accounts/policies. A transitional period of five years, until the end of 2029 at the latest, has been granted for balances in existing accounts or policies.
Caution: If the pension fund capital is withdrawn at the same time as 3rd pillar assets, high taxes may be incurred as a result of tax progression. This should be avoided by making an early withdrawal of pillar 3a funds. This is possible up to five years before reaching the reference age.
- Make any necessary adjustments to the salary system.
The current AHV-free allowance amounts to CHF 1400 per month. In future, this allowance will be optional for pensioners who continue to work. By waiving the AHV-free allowance, they have the option of paying additional contributions after reaching the reference age. These additional contributions can increase the amount of the retirement pension they will receive.
If you implement these measures, you will be well positioned to navigate the impacts of the AHV reform. However, the AHV reform also requires increased communication and discussion with employees. Provide them with information, hold discussions with them and support them in their personal pension planning. In this way, both employers and employees can benefit. This will also help optimize your company's HR strategy.