On March 3, 2024, voters in Switzerland will decide on a popular initiative by the trade unions entitled "Better living in old age". This initiative calls for the introduction of a 13th AHV pension, similar to the 13th monthly salary that is widely paid in Switzerland.
AHV is the German abbreviation for Alters- und Hinterlassenenversicherung = Old-age and survivors' insurance, which is the foundation of Swiss old-age provision. More than 2.5 million pensioners currently receive an AHV pension. The AHV pension is intended to adequately cover their basic needs in old age.
You've got to be kidding me. It's currently between CHF 1,225 (minimum) and 2,450 (maximum), a month. Times 12.
A one bedroom apartment in my state is roughly between CHF 1,300 and 1,700, and that's without utilities. People need insurances, people need to eat, and let me tell you, groceries are not cheap in this country.
Here's a simple, random basket full of basic groceries. The total comes to CHF 38.45. The good news is, VAT is already included. At today's rate that's USD 44.55. WOW, when did this happen? Until a while ago, the exchange rate was almost stable at 1:1?!
With an income this low you can't drive a car, and public transportation - again - is pricey in this country.
Most pensioners have other income, in particular from their employer's pension fund. However, the Federal Council dropped the ball on this one. Back when I was studying for my HR diploma, An interest rate of 4% on pension fund moneys had to be guaranteed.
Since the poor bank and insurance companies saw themselves unable to meet this goal, the interest rate has been lowered again and again. Most currently, the technical interest rate has been reduced from 2.25 to 1.75% as of January 1, 2022.
Imagine you had a nice pension capital of half a million, for which you've been working hard all of your professional life. Back when the interest rate was 4%, you would accrue 20k a year. Nowadays it's 8,750. Ridiculous.
Those who cannot cover their living expenses with this are entitled to supplementary benefits.
If introduced, the costs for the 13th AHV pension would probably amount to around CHF 4.1 billion, of which the federal government would have to pay around CHF 800 million. Due to the demographic development, costs would increase rapidly thereafter. The initiative leaves the question of financing open. Thanks to various reforms, AHV benefits are well financed today; however, deficits are to be expected after 2030 - even without a 13th AHV pension. If the 13th pension were introduced, the AHV would need additional income or it would have to cut benefits.
Guess where they would turn to for additional income? The working generation. Higher salary deductions. In times of raising prices and inflation.
So much for the theory. I could cut this post short and tell you what immediately catches my eye: The organizations that mean well and want to give retirees a better standard of living, have no clue whatsoever how and by whom this huge financial commitment is supposed to be met! To me, this is the end of the story.
This exactly why the Federal Council and Parliament recommend rejecting the initiative.
In my eyes, this initiative is just wishful thinking. Just in 2022 it was voted on raising the retirement age for women. For some reason it was previously 64 and will now be aligned with that of men, so both will retire at 65.
I'm OK with that, but many underpaid ladies were mad to see their only goodie go. They're not wrong. Women who stopped working in order to be at home with the kids, suffer from gaps in contributions, and the system just assumes that husbands will cover them.
The thing is though, a married couple, should they both reach age 65, will not receive two pensions, but 1.5 - after all they share costs of living. That must have been the reasoning.
What an injustice, since more and more couples live together, unmarried, and they receive two separate, full pensions.
Also, in order to even qualify for a full pension, over the course of a 40+ years' career, you need an average yearly salary of 88k. What part-time working Mom makes that much? I sure don't. The average Swiss person statistically makes 85k annually. By working full time over all these years.
So excuse me if I think the committee that submitted this initiative should have done its homework to figure out how to finance these new benefits. Maybe they know of a pot of gold somewhere? We should all saddle up our rainbow-colored unicorn and ride there..!
This is so frustrating, we work and pay into things that are supposed to help us when we have the chance to retire and it just seems that this idea keeps seeming more and more impossible. Shouldn't there be something for part-timers? Like you said, how many part-timers make 88k?!
ReplyDeleteHere in the U.S., I've been hearing for years that there won't be any money left in Social Security by the time the younger Gen X/Xennial/Elder Millennials are ready for retirement. I would expect that most people won't be able to truly retire. Employers who still pay pensions here are rare. I'll admit, I don't know a whole lot about this, though, I do realize I need to start paying more attention. Thanks for making me think about this.
Gosh someone needs to rethink things. I part that I especially don't like is a married couple only getting 1.5 pensions. A few years back we had long married couples getting a divorce so they could afford to eat. That is so sad.
ReplyDeleteTamara, thanks for this thoughtful and illuminating post! We have similar issues here. As to legislators thinking integratively, California has passed laws such as: requiring everyone to have electric cars, but California's electric grid cannot provide that much juice. I could go on and on, but you know what I mean. Hang in there! <3
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