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MONEY

Three budget cuts Switzerland wants to make that will impact you

This may come as a surprise to anyone believing Switzerland has no money woes, but the country is facing a deficit of several billion francs. Here are some ways it is planning to solve it.

Published: 11 September 2024 13:56 CEST
Updated: 15 September 2024 08:17 CEST
Three budget cuts Switzerland wants to make that will impact you
Federal government would scrap childcare funding to save money. Image by Carole LR from Pixabay

Switzerland’s deficit — estimated at about 3 billion francs a year — is mostly due to additional spending on boosting up the army and state pensions.

To keep a tighter grip on its expenses, the Federal Council has set up a group of experts tasked with analysing the state of Swiss finances and proposing some cuts to achieve its goal of reducing the budget by at least 3 billion francs by 2027 and by at least 4 billion by 2030.

The group has presented over 60 measures that could considerably curb government spending, making it possible to save 4 to 5 billion francs per year.

These are some of the proposed measures that could, if approved, impact many households in Switzerland:

Social welfare

One idea is to scrap federal subsidies for childcare, leaving the funding of the scheme to each canton.

“Elimination of support for extra-familial childcare would have the most significant impact, resulting in savings of between 800 and 900 million francs a year,” the experts reported.

Pensions

The group proposed to abolish tax benefits for capital withdrawals under the second and third pillar-pensions.

This measure, which would reduce tax incentives to withdraw retirement capital, would generate an additional income for the federal government of about 200 million francs per year.

READ ALSO: What is Switzerland’s ‘third-pillar’ pension and how can it benefit you? 

Public transport and road infrastructure

Financing of the railway infrastructure fund (BIF) and the national road and agglomeration transport fund (NAF) are to be reduced.

Projects that are not yet under construction would have to be ‘re-prioritised’: they would require a constitutional amendment with a mandatory referendum.

What is happening next?

Right now, these are just proposals put forth by the expert panel, and may or may not be implemented in the end.

The next step is for “all the measures proposed by the group of experts to be discussed with the cantons, political parties, and social partners during round tables,” the Federal Council said.

“Following the round tables, the Federal Council will decide which measures to adopt and submit to the ordinary consultation procedure. This will probably begin in January 2025,” the government noted. 

Does all of this mean Switzerland is in financial trouble?

Not really.

In fact, it is on a more solid financial ground than most countries.

According to media reports, “despite the higher budget deficits, Switzerland’s government debt will still be low by international comparison, reaching 16.6 percent of GDP by 2028. This compares with 46 percent in Germany, 92 percent in France and far below the 101 percent level in Britain, according to data from the International Monetary Fund.” 

READ ALSO: What is Switzerland’s debt brake and how does it affect residents? 

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MONEY

How your Swiss pension and benefits payments will rise next year?

If you are a pensioner or depend on various allowances, more money will be coming to you from the Swiss government next year.

Published: 28 August 2024 16:26 CEST
How your Swiss pension and benefits payments will rise next year?

From January 1st, 2025, first-pillar state pension, as well as disability pension, will increase by 2.9 percent, the Federal Council announced on Wednesday.

That’s because every two years, the government must check whether the pensions need to be adjusted to inflation and wage developments — and they do have to be next year.

This is what you can expect in 2025:

Higher AHV / AVS

The minimum pension will go up by 35 francs to 1,260 francs a month, while the maximum amount will increase by 70 francs from 2,450 to 2,520 a month.

Child allowance

This will go up from 200 to 215 francs a month per child, and the training allowance will increase from 250 to 268 francs per month. (The former is a payment for children up to the age of 16, and the latter for those aged 16 to 25, who are undergoing education).

Family allowances are intended to partially offset parents’ costs for child support. The federal government sets a minimum rate per child per month, and individual cantons can add to that amount from their own coffers.

READ ALSO: What welfare benefits can you get if you have children in Switzerland?

Supplementary benefits

These are meant to provide more money to cover general living expenses for low earners: for single people, the amount increases from 20,100 to 20,670 francs per year, for married couples from 30,150 to 31,005 francs per year, for children over 11 years of age to 10,815 francs, and for children under 11, to 7,590 francs.

In addition, the amounts of rent subsidies (also for eligible low earners) will go up as well: in major cities, the annual maximum amount will be 18,900 francs, in smaller towns 18,300 francs, and in rural areas 16,680 francs.

The flat rate for ancillary and heating costs is also being adjusted: it will increase from 3,060 to 3,480 francs per year.

All of these hikes will cost the federal government 22 million francs and the cantons 13 million francs, the Federal Council said.

Earned income deductible

The tax-free allowances on earned income will also be adjusted to the wage development according to the wage index by 2025.

They will go up from 1,000 to 1,300 francs per year for single people, and  from 1,500 to 1,950 francs per year for married couples and people with children.

This will result in additional costs for the federal government and the cantons of 11 million francs.

And these are deductions you will be able to make on your 2025 tax return — if you qualify, that is:

READ ALSO: Swiss government to adjust tax rates and deductions 

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