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The gap between Switzerland’s official retirement age – 65 for men and 64 for women – and average life expectancy is long. Life expectancy at 65 is 20 years for men (85) and 23 for women (88).
More and more people are questioning the viability of living for two decades or more without working, particularly when the population is aging and the pension system is crumbling.
However, rather than raising the official retirement age, some favour financial incentives to tempt people to work longer. The percentage of people over 65 in Switzerland working is low (12.5% in 2018), although it is slowly rising. It was 9.5% in 2010.
This week, Peter Hegglin, a member of the Council of States, Switzerland’s upper house, suggested relooking at the incentives in place, according to the newspaper Le Matin.
Currently, an average man foregoing the state pension until the age of 70 loses out financially because their full pension only rises from CHF 2,350 to CHF 3,090 if they wait until 70 before collecting it. They give up CHF 141,000 (CHF 160,000 if invested at 5%) of pension in return for a total lifetime state pension uplift of CHF 133,200, assuming they live until 85. This represents a loss of CHF 26,800. Only a small healthy minority betting on surviving beyond 88 would be advised to take up this offer.
One of Hegglin’s suggestions is to lower social security taxes after the official retirement age and to allow any extra years of work to make up for missing years of contributions to both state and private employee pensions. Another is to create special tax cuts for this group.
The Council of States supported Mr Hegglin’s proposal by 26 to 7.
Meanwhile, the Federal Council is working on a plan to reform state pensions, which it will present to parliament in autumn. It is already considering some of Mr Hegglin’s suggestions but is not keen on targeted tax incentives.
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