On January 1, 2024, several measures of the AHV 21 reform will come into force, including a more flexible retirement age. People aged 63 to 70 will be able to draw their retirement pension gradually in the form of partial pensions. Value added tax will be increased to 8.1%.
From 2024, the term «reference age» in social insurance law will replace the previous term «retirement age». This change will result in greater flexibility in retirement, as Mélanie Sauvain from the Federal Social Insurance Office (FSIO) explains in 'Social Security CHSS'.
There have long been calls for more flexibility in retirement
There was already a certain degree of flexibility in the old-age and survivors' insurance (AHV) before the start of 2024: there was no legal obligation to retire from working life exactly at the retirement age of 65 (men) or 64 (women). This can be seen, for example, in the average age of people leaving the labor market for good: According to the Federal Statistical Office (FSO), this will be 65.2 years for men and 64.4 years for women in 2022.
Nevertheless, there have long been calls for more flexibility when it comes to retirement. With the entry into force of the reform to stabilize the AHV (AHV 21), which was approved in the referendum in September 2022, this request will be implemented on 1 January 2024: insured persons will be able to plan their retirement more flexibly and individually.
«Reference age» refers to the age from which the pension can be drawn without reduction
In future, the term «reference age» will refer to the age from which an old-age pension can be drawn without any reduction or supplement. For men and women born in 1964 or later, the reference age is now 65, while a different reference age applies for women born before 1964.
There are numerous options for pensioners between the ages of 63 and 70
The AHV pension can be withdrawn early from the age of 63 and - for women of the transitional generation - from the age of 62. In the event of an early withdrawal, the pension is reduced according to a rate that takes into account the number of months between the early withdrawal and the reference age. AHV 21 introduces the option of withdrawing the pension monthly and no longer only in whole years. For example, the pension can be withdrawn in advance from the age of 64 and 2 months.
Insured persons can also defer drawing their retirement pension until the age of 70 at the latest. The pension must be deferred for at least one year, after which the pension can be paid out from any month up to five years after reaching the reference age at the latest. In the case of deferral, the pension is increased at a rate that depends on the number of years and months between reaching the reference age and the effective date of drawing the pension.
A special regulation applies to women born between 1961 and 1969
As part of AHV 21, the reference age for women will be gradually raised from 64 to 65 from 2025. The compensatory measures for women of the transitional generation will also come into force from 2025.
For women retiring in the next ten years, adjusted rules for pension withdrawals will be applied to make the transition to the new system smoother. This so-called transition generation can continue to draw their pension early from the age of 62, although their pensions will be reduced less than those of all other insured persons. The decisive factors for the gradual reduction are the level of income and the year of birth. For example, a woman born in 1965 with an average annual income of less than CHF 57'360 can continue to retire at the age of 64 without her AHV pension being reduced. Women of the transitional generation who do not take their old-age pension early receive a monthly supplement to their AHV pension for life. The amount of the supplement depends on the relevant average annual income and the year of birth.
A tool for the individual calculation of the reference age as well as the supplements and reduction rates for women born between 1961 and 1969 is available on the FSIO website.
Retirement can take place gradually
Another innovation that provides more flexibility in retirement is the partial early withdrawal or deferral of a partial pension. In future, insured persons will have the option of partially withdrawing or deferring their pension - regardless of whether they continue to work or not. For example, it is possible to reduce working hours and at the same time compensate for the lack of income by drawing part of the AHV pension. The proportion of the partial withdrawal is freely selectable, but must be between a minimum of 20% and a maximum of 80% of the retirement pension. From the first partial withdrawal, the proportion drawn can only be increased once until the full pension is drawn.
The amendment to the law will allow a combination of early withdrawal and deferral from 2024: part of the pension can be withdrawn early and the rest deferred. From the first partial early withdrawal, the portion drawn can be increased once again between the ages of 63 and 70. After that, the entire pension must be drawn.
New reduction and increase rates
In the case of an early withdrawal, the pension is reduced, in the case of a deferral it is increased - whereby the reduction and increase rates are now linked to life expectancy. Due to increasing life expectancy, these rates will be lower than today.
The Federal Council will set the new reduction and increase rates for 2027 at the earliest. A reduced reduction rate will then be applied for low incomes.
The same provisions apply in the second pillar
The reference age of 65 now also applies in the mandatory occupational pension scheme (BVG) as part of AHV 21 and the principle is the same: From the age of 65, insured persons are entitled to the full (i.e. unreduced) pension. The above-mentioned flexible retirement age between 63 and 70 also applies to all BVG insured persons, with partial withdrawal of pensions. However, the pension funds have a certain amount of leeway and can go beyond the minimum requirements of the BVG. For example, they can stipulate a lower reference age than 65 in their regulations, but it must not be lower than 58. In addition, they can offer insured persons from the age of 58 continued insurance at the previous salary level. This allows for a variety of combinations over and above the statutory minimum flexibility.
AHV 21: Further changes will apply from 2024
An important change from 2024 applies to people who are still in employment after the reference age of 65: In future, they can decide whether or not they want to pay AHV contributions on the part of their salary that is less than CHF 1'400 per month (or CHF 16'800 per year). Above this allowance, contributions will continue to be compulsory. Another new feature is that contributions paid in after the 65th birthday can in future be taken into account when calculating the retirement pension. This means that the old-age pension can be increased (up to the maximum amount provided for by law).
From 2024, the waiting period for entitlement to an AHV helplessness allowance will also be reduced from twelve to six months. The waiting period is the minimum period during which a person must have a regular need for assistance before they are entitled to a helplessness allowance. Pensioners who are permanently dependent on the help of third parties for everyday activities such as dressing, personal hygiene, eating, etc. are entitled to benefits. Under disability insurance (IV), the waiting period for entitlement to a helplessness allowance is still one year.
Value added tax to be increased
The standard VAT rate will be increased by 0.4 percentage points to 8.1% in 2024. The reduced rate will rise to 2.6% and the special rate will now be 3.8%. The revenue generated by the VAT increase will go entirely to the AHV and will be in addition to the revenue from the «demographic percentage», which already benefits the insurance today. The increase should contribute to a certain stabilization of AHV finances.