Swiss Senate Backs Mixed Funding for 13th Pension

The Swiss Senate has approved a proposal to finance the upcoming 13th payment of the AHV/AVS old-age and survivors’ pension through a combination of employee contributions and value-added tax (VAT).

Under the approved plan, employee contributions will increase by 0.2 percentage points, lower than the previously proposed 0.3 percentage points. VAT will also be raised by 0.4 percentage points, while the reduced VAT rate will remain unchanged at 2.6%.

The proposal marks a compromise between different parliamentary positions. Earlier, the House of Representatives had suggested financing the additional pension payment entirely through VAT increases until 2033. However, this approach was not adopted by the Senate.

The final decision now moves back to the House, which is scheduled to vote on the proposal on June 17. If the House rejects the plan, the 13th AHV pension payment is still expected to be introduced from December, although the funding mechanism would remain unresolved.

The 13th pension initiative was approved by Swiss voters in 2024 as a measure to support retirees facing rising living costs and inflation. The initiative, backed by trade unions and left-leaning political groups, aims to provide an additional monthly pension payment each year, similar to the widely known 13th salary in Switzerland.

Parliament has since been working to determine a sustainable financing model for the reform, balancing social welfare commitments with long-term fiscal stability.

The Senate’s decision represents a significant step forward in implementing the pension reform, but the final outcome will depend on the upcoming parliamentary vote.