Switzerland’s AHV/AVS 21 law, which was approved by parliament and then passed by public referendum in 2022, took effect January 1, 2024. Among other things, the law will increase the age for normal retirement (now called the “reference age”) for women under the social security AHV/AVS[1] retirement program as well as for pension plans that provide the mandatory BVG/LPP[2] retirement benefits.
In addition, further AHV/AVS reforms are planned, which also could affect BVG/LPP pension plans.
In March 2024, the initiative for a 13th month of AHV/AVS pension was adopted in a public vote; however, the financing and implementation modalities still have to be worked out. Currently, it is expected that the reform will lead to an AHV/AVS pension increase of 8.33% and that this will be paid out monthly or yearly from 2026. For pension plans, the introduction of the 13th AHV/AVS pension will have an impact wherever occupational benefits schemes are based on the AHV/AVS pension, in particular with regard to the BVG/LPP threshold amounts, the BVG/LPP benefits and the AHV/AVS bridging pensions.
Separately, the public vote on the controversial BVG/LPP 21 reform approved by parliament in March 2023 (see the Global News Brief: Switzerland: Parliament again approves occupational pension reform for details) has now been scheduled to take place on September 22, 2024.
Employers should consider the potential effects of the AHV/AVS 21 changes on their employees’ retirement patterns. In the context of mandatory BVG/LPP pension plans and any voluntary supplemental retirement plans, this may have an effect on the valuation of plan liabilities for accounting and funding purposes.
