Retirement is a hot-button topic for everyone who works in Switzerland.

It is all the more relevant, since the ‘Worry Barometer’ — an annual survey of concerns that preoccupy Switzerland’s population the most in any given year — consistently shows that pensions, and having enough money for retirement, are among the top worries.

And there is a good reason for that: as more people live longer (especially in Switzerland, which has one of the world’s highest life expectancies), continuing to fund first-pillar state pensions (AHV in German and AVS in French and Italian) is a major challenge. 

The government is tackling this problem in various ways.

One is increasing the VAT rates.

From January 1st, 2024, these rates will increase as follows:

• The standard VAT rate will rise from 7.7 percent to 8.1 percent
• The reduced VAT from 2.5 percent to 2.6 percent
• The special rate for hotel accommodation goes from 3.7 percent to 3.8 percent

Another way to ensure that the current level of benefits is maintained is increasing the retirement age for women.

Right now, men in Switzerland retire at 65, while since 1997 women stop working at 64. Prior to that year, they retired even earlier, at 62 — no wonder the AHV / AVS scheme has been running a deficit since 2014.

However, starting in 2025 and until 2028, Switzerland will gradually implement the same retirement age for women as for men — 65 — a move that is expected to boost coffers of the old-age pension scheme.

Both VAT and higher retirement age, by the way were approved by Swiss voters in referendums.

READ MORE: OPINION: Switzerland can no longer justify a lower retirement age for women

However, the new retirement age is not written in stone: the government is open to upping it to 70 in certain cases.

The Federal Council has accepted a motion from MP Ruth Humbel, who proposed to set the retirement age based on the duration of each individual’s professional activity.

The current calculations for a monthly AHV / AVS pension are based on a person working full time, and contributing to the scheme for 44 years — that is, from age 21 to 65.

This means that people who started working later would not receive full pension.

However, Humbel’s proposal postulates that if someone started their professional career later— say at 26 — they would continue to work until 70, and receive the full first-pillar pension, which is currently 2,450 francs a month, but set to go up to 2,464 francs in July when it is adjusted for inflation.

The lowest AHV / AVS pension, on the other hand, is currently 1,225 a month, to increase to 1,232 in July.

Keep in mind, however, that these are the current amounts of the first-pillar pensions (Switzerland has a total of three, see the link below). As they are typically adjusted for inflation once a year, the amount could be different when you retire.

READ MORE: EXPLAINED: How does the Swiss pension system work – and how much will I receive?

Pensions are adjusted for inflation. Photo: Claudio Schwarz on Unsplash

What else should you know about retiring in Switzerland?

For many people, being able to afford life in Switzerland once they no longer work is a huge concern.

If you receive all three pillars mentioned above, then you probably can live comfortably after retirement.

It also helps if you have savings to fall back on.

A UBS study carried out in 2021 showed that while still working, a person over the age of 50 in Switzerland must set aside 14 percent of their income for retirement. (These days, given the current inflation level of nearly 3 percent, this amount is likely higher). 

This means that if, for instance, you earn 100,000 franc a year, 14,000 francs should be saved for 15 years, which in the end will give you a nice nest egg of 210,000 francs.

Of course, these figures should be adjusted down or upwards, depending on your income.

READ MORE: How much should you save for a ‘comfortable’ retirement in Switzerland?

This is actually quite good because the same UBS analysis found that “in some countries, much higher private savings rates than in Switzerland are necessary to maintain living standards in retirement”.

As an example, Italians must put aside 28 percent of their money for their retirement, Germans 30 percent, and the French 44.

In the United States, people must save 42 percent of their income to live comfortably after they retire.

Of the 24 surveyed countries, pensioners in Nigeria (145 percent), Russia (108 percent) and Japan (102 percent) fare the worst.

These articles will provide more information about retiring in Switzerland:

EXPLAINED: Everything you need to know about retiring in Switzerland

Reader question: Can I take my pension money with me when I leave Switzerland?

EXPLAINED: How to get a visa to retire in Switzerland