When we no longer receive income from gainful employment in old age, our retirement provision ensures that we can continue to live our lives in financial independence and without falling into existential hardship. On 1 January 1948, the OASI came into force and the first pensions were paid out. Today, the demand for retirement provision goes beyond mere subsistence levels. Older people should be able to run their lives after employment and participate in society in financial independence. The Swiss pension system has therefore been expanded over the years and is now based on three pillars: The first pillar is the state pension, the second pillar is employee benefits, and the third pillar is private retirement planning.

How and why is the OASI being reformed?

Due to rising life expectancy and the increasing need for flexible retirement, the Swiss pension system in general and the OASI in particular have come under pressure in recent years. Higher life expectancy means that old-age pensions have to be paid out to pensioners for longer. In addition, the baby boomer generation (born between 1955 and 1970) is just reaching retirement age. Because of demographic trends and a simultaneous decline in birth rates, today there are three gainfully employed persons financing the pension of each pension recipient, whereas 70 years ago there were six. This has undermined the financial equilibrium of the pay-as-you-go OASI. Consequently, expenditure is rising faster than revenue. The OASI reform is a political measure to counteract this. It secures the financing of the OASI and guarantees pension contributions until 2030.

The OASI reform comprises two interlinked initiatives:

• Stabilization of the OASI (OASI 21)
• Additional financing of the OASI through an increase in value-added tax

Results of the vote

The OASI reform was approved by the Swiss electorate on 25 September 2022. After decades of stalemate, the first major step is being taken to restructure the pension system. Both the amendment of the OASI legislation and the federal resolution on additional financing of the OASI through an increase in VAT were adopted. 50.55 percent of the population voted for the former, and a majority of 55.07 percent voted for the latter.

What will change with the OASI reform?

In a nutshell, this will mean the following changes:

• The reference age  Age at which retirement provision benefits are paid without supplements or deductions. of women and men will be standardized to 65
• Retirement will be made more flexible
• Value added tax will be increased by 0.4 percent

The entire population will be impacted by the increase in VAT, especially since the prices of goods and services will rise accordingly as a result of the VAT increase. However, the first two points – raising the reference age and making retirement more flexible – are interesting.

When will the OASI reform be implemented?

The OASI reform comes into force on 1 January 2024. Until the changes come into effect, the previous legislation will remain in force. The gradual increase in the legal reference age for women is expected to take effect one year later, on 1 January 2025. The compensatory measures for women in the transitional generation will come into force at the same time. The legislation on the increase in VAT rates for further financing of the OASI will also come into force on 1 January 2024; the standard rate will then be 8.1 percent (previously 7.7 percent).

Impacts of the OASI reform on pension recipients

Passing the bill is one thing, but its implementation and the impact on pension recipients are another. The following is an overview of the most significant consequences for Swiss pension recipients, together with advice on what needs to be taken into account when retiring in the future.

Which ages will be affected by the OASI reform?

The legal retirement age for women will be gradually increased by three months per year from 64 to 65. Women born in 1961 and younger are affected. Women born in 1961 must work for three months longer, those born in 1962 for six months, those born in 1963 for nine months, and women born in 1964 and later must work until the age of 65. Consequently, from 2028 onwards, women and men will be subject to the same retirement age of 65.

What do I need to consider in the future when planning my retirement?

Women and men are affected by the OASI reform. This is because the OASI reform also changes the way pensions are drawn and employment after the age of 65.

Transitional generation

Women born between 1961 and 1969 (i.e. those currently nearing retirement) belong to the transitional generation. They will be financially compensated for the increase in their retirement age and are entitled to compensation benefits. The following options are available:

Option 1: Drawing of pension from reference age with lifelong supplement

Women who decide to work until the new reference age will benefit from a lifelong supplement to their OASI pension. Women with lower incomes will receive higher supplements. The maximum monthly pension supplement is:

• CHF 160 for an average annual income of less than CHF 57,360
• CHF 100 for average annual incomes between CHF 57,361 and CHF 71,700
• CHF 50 for average annual incomes from CHF 71,701

Useful to know

Only women born in 1964 and 1965 will receive the full supplement. The supplement drops to zero up to a year of birth of 1970.

Option 2: Anticipated withdrawal of old-age pension with lower reduction rates

Alternatively, women in the transitional generation may opt out of the higher reference age. In this case, they retire at age 64 (or earlier). As a result, their pensions will be reduced. Lower-income women experience smaller reductions than those with higher incomes.

Useful to know

For women born in 1961 and 1962, anticipated withdrawal of the OASI pension is possible as early as 2023 or 2024, depending on the duration of the anticipated withdrawal (i.e. before the reform comes into force). They will therefore not benefit from the lower reduction rate for the transitional generation until 2025. The current rates of 6.8 percent (one-year anticipated withdrawal) and 13.6 percent (two-year anticipated withdrawal) will apply until then.

Flexible pension withdrawal

Men and women can now draw their OASI pensions flexibly between the ages of 63 and 70. It is also possible to draw the pension gradually (i.e. 20 to 80 percent), and defer the rest. In addition, retirement can now be taken in monthly rather than annual increments.

Working after the age of 65

Anyone who works beyond the reference age and earns more than CHF 1,400 per month continues to pay into the OASI. At present, however, these contributions do not result in a higher pension. This will change to some extent when the OASI 21 reform comes into force. In future, it will be possible to voluntarily waive the tax-free allowance and have the OASI contributions taken into account when calculating the pension. This makes it financially more attractive to continue working after the age of 65. In this way, it is possible to fill previous gaps in contributions or to increase the personal OASI pension. However, once the maximum pension has been reached, it can no longer be increased.

The Swiss retirement provision system – what now?

The OASI 21 reform is an important step towards restructuring the pension system – but financing has only been secured until 2030. After that, there is a risk that the OASI will once again run into a deficit. The current discussion on employee benefits also shows that further reforms of the Swiss pension system are unavoidable. This is because a reform of employee benefits is currently also being debated for the second pillar. For these reasons, the future of the Swiss pension system remains exciting. One thing is certain: the reforms of the 1st and 2nd pillars improve state and employee benefits, but those who want to play it safe, must take their retirement provision into their own hands with the third pillar.