Berset pushes for tax-hike to solve pension problems

By 2033, the number of people of retirement age will have increased by 50% from 2.6 million to 3.9 million, according to the Swiss president Keystone

Swiss President Alain Berset has defended his proposed pension reform plans, which include a 1.7% increase in valued-added tax (VAT) to fund it. 

In a lengthy interview in Monday’s Neue Zürcher Zeitung (NZZ) newspaperExternal link, Berset, who is also home affairs minister, warns that reforms of the pension system are long overdue and that the financial needs may be “considerable” in the future. 

“By 2033, the number of people of retirement age will have increased by 50% from 2.6 million to 3.9 million,” he said. “We have to accept unpleasant facts. If we want to maintain the pension level and stabilise the state pension scheme, we urgently need substantial additional financing. The only question is how this is done.” 

The Swiss government has proposed reforms – for the fourth time in two decades – to amend legislation to remove a structural deficit in the state pension scheme. A previous pension reform plan presented by Berset was rejected by voters in September 2017. 

“The problems of old-age pension remain unresolved following the September vote,” Berset told NZZ.

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In March, the government presented the outlines of a new state pension reform plan, including raising VAT by 1.7% to fund it, and raising the retirement age for women from 64 to 65. The government, however, maintains that everyone should be able to choose flexible retirement between 62 and 70. People will nevertheless be encouraged to keep working beyond 65. 

Berset says fixing a general retirement age will not solve the problem because companies will not employ older workers. 

“Older workers continue to be disadvantaged. But it is true that, due to demographic changes and the shortage of skilled workers, they will be in greater demand in the future. Rigid fixation on a generally higher retirement age is the wrong approach. If we give the right incentives, more people will work longer voluntarily. The aim must be to raise the effective retirement age,” the minister told NZZ. 

Berset is to submit a detailed proposal for consultation by lawmakers before the summer break.