From December, Swiss retirees will be able to receive a 13th pension payment, whilst behind the scenes, ways still need to be found to fund it.
Keystone / Michael Buholzer
On November 29, the Swiss will vote on funding a 13th monthly pension payment by increasing value-added tax (VAT) by 0.4 percentage points. If the proposal is rejected, payment of the 13th monthly pension will still go ahead from December 2026, but funding will yet have to be secured.
This December will be a special one for those receiving the Old Age and Survivors’ Insurance (OASI), the first pillar of the Swiss pension system. For the first time, retirees – whether living in Switzerland or abroad – will receive a 13th monthly pension payment. What is still unclear, however, is how this extra payment is to be funded. On November 29, Swiss voters will have their say on the solution proposed by parliament.
What exactly is the vote about?
The referendum does not threaten the 13th pension payment. This was approved by 58.2% of voters in March 2024. On November 29, the Swiss will be deciding on how to fund part of this new expenditure.
Single pensioners will now receive up to CHF2,520 ($3,031) more a year and married couples up to CHF3,780. This will cost a total of over CHF4 billion annually. As the number of retirees continues to grow and pensions are regularly adjusted to the cost of living, this figure is expected to rise, reaching CHF5 billion a year from 2035 onwards.
To cover part of these additional costs, parliament is proposing to increase VAT from 2028. The standard rate, which applies to most goods and services, would go up by 0.4 percentage points, from 8.1% to 8.5%. The special rate for the accommodation sector would rise from 3.8% to 4%. Meanwhile, the reduced rate of 2.6%, which applies in particular to food, medicines and books, would remain unchanged.
This VAT hike, which is expected to generate around CHF1.4 billion a year, would still not be enough to cover the full cost of the 13th pension payment. It would, however, ease the financial burden on the state old-age pension system. The Swiss government has already drawn up a scenario for additional funding for the 13th pension in its OASI 2030 reform proposal, which is currently under consultation. This could entail a further increase in VAT or a combination of VAT and social security contributions.
How is the state pension system funded?
The OASI is funded through a pay-as-you-go system. This means that the contributions from today’s active workforce directly finance current pensions. Worker and employer contributions account for around 70% of OASI revenue.
The federal government covers just over 20% of expenditure, mainly through its general funds, as well as taxes on tobacco and spirits. About 9% of revenue comes from VAT and the tax on casinos. Added to this are any returns generated by the investment of OASI reserves, which can vary significantly from one year to the next. In 2025, OASI revenue thus totalled just over CHF55 billion.
How are pension finances faring?
The state old-age pension system is currently in a relatively sound financial position. It closed the 2025 fiscal yearExternal link with a CHF4.4 billion surplus. This is largely thanks to the additional revenue generated by the Tax Reform and OASI Financing Act and the OASI 21 reform.
However, the retirement of the baby-boomers and the decrease in the active labour force are putting pressure on the social insurance system. On top of this now comes the cost of the 13th pension payment. From this year onwards, expenditure will exceed revenue by more than CHF1 billion. Without additional funds, annual deficits will hit nearly CHF5 billion by 2035, according to estimates by the Federal Social Insurance OfficeExternal link. With the VAT increase, the deficit is expected to drop to CHF3 billion.
Why is a nationwide vote necessary?
Increasing VAT requires an amendment to the Swiss Constitution. Voters must therefore decide whether to accept the Federal Decree on Additional Financing of the OASI through a VAT IncreaseExternal link. The bill will need to secure a majority of both the people and the cantons to be approved.
Who is for the reform and who against?
Parliament and the government support the VAT increase. The centre-right parties are against, while the left-wing and centrist parties are in favour. The major trade unions also support the reform, although there are dissenting voices within their ranks – in particular the public service union, which recommends rejecting the proposal.
Why vote for the reform?
The main argument is financial. The introduction of the 13th OASI pension payment was decided in a nationwide referendum. To respect the will of the people, funding must now be secured to prevent the OASI’s accounts from slipping into the red.
Supporters of the VAT hike believe this is the best way to finance the new pension payments quickly. In parliament, the left had advocated a mixed funding approach, combining an increase in payroll contributions and VAT. However, it regards the chosen solution as the best possible compromise given the current political dynamics. The left-wing supporters of the VAT increase also believe it will help reduce pressure to raise the retirement age, in particular from the political right.
The backers also point out that the 0.4 percentage points increase is modest and that essential goods are exempt. For the vast majority of retirees, they say, the gain from the 13th pension payment will outweigh the additional costs arising from higher VAT.
Why vote against?
The opponents of the reform do not challenge the payment of the 13th monthly pension, but rather the funding method. They believe that an increase in VAT will put too great a strain on households’ purchasing power, which is already squeezed by rising health insurance premiums, rents and day-to-day expenses.
They also criticise the fact that the reform would cover only part of the cost of the 13th pension. The focus should instead be on addressing the structural problems of the OASI, the Radical-Liberal Party (centre-right) argues.
On the left, the public service union regards VAT as an anti-social tax that hits low earners proportionally harder. It also points out that additional funding is not necessary in the immediate term, given the sound financial health of the state old-age pension system today.
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Edited by Pauline Turuban. Adapted from French by Julia Bassam/ac
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