Employer Action Code: Act
Switzerland’s AHV/AVS 21 law, which was approved by parliament and then passed by public referendum in 2022, took effect January 1, 2024. Among other things, the law will increase the age for normal retirement (now called the “reference age”) for women under the social security AHV/AVS[1] retirement program as well as for pension plans that provide the mandatory BVG/LPP[2] retirement benefits.

Key details
The reference age for women (currently age 64) under the AHV/AVS and under BVG/LPP pension plans will be increased in four steps (by three months each year from 2025 to 2028), reaching age 65 (thus aligning with the current reference age for men).

To compensate for the effect of this change, women closer to retirement will receive a lifetime pension supplement based on their birth year (for women born from 1961 to 1969) and income level.

More flexible options for retirement are provided; early retirement is possible from age 63 (whereby pension funds may allow it from age 58) and deferral of retirement is possible until age 70 as long as employment is continued; partial (early/deferred) retirement is possible.

For both women and men who remain in work beyond their reference age, their AHV/AVS contributions will result in larger AHV/AVS benefits (previously not the case), potentially incentivizing deferred retirement.
In addition, further AHV/AVS reforms are planned, which also could affect BVG/LPP pension plans.

In March 2024, the initiative for a 13th month of AHV/AVS pension was adopted in a public vote; however, the financing and implementation modalities still have to be worked out. Currently, it is expected that the reform will lead to an AHV/AVS pension increase of 8.33% and that this will be paid out monthly or yearly from 2026. For pension plans, the introduction of the 13th AHV/AVS pension will have an impact wherever occupational benefits schemes are based on the AHV/AVS pension, in particular with regard to the BVG/LPP threshold amounts, the BVG/LPP benefits and the AHV/AVS bridging pensions.

Separately, the public vote on the controversial BVG/LPP 21 reform approved by parliament in March 2023 (see the Global News Brief: Switzerland: Parliament again approves occupational pension reform for details) has now been scheduled to take place on September 22, 2024.

Employer implications
Employers should consider the potential effects of the AHV/AVS 21 changes on their employees’ retirement patterns. In the context of mandatory BVG/LPP pension plans and any voluntary supplemental retirement plans, this may have an effect on the valuation of plan liabilities for accounting and funding purposes.

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