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Switzerland: Swiss pension reform 2020 rejected in a popular vote

(PresseBox) (Berlin, ) b]The “pension reform 2020” and an additional increase in the VAT rates for pension funding purposes was rejected in a federal popular vote on September 24th, 2017. [/b]

The reform package strived to preserve the benefits of old-age insurance (AHV) and pension funds (BVG) and to raise sufficient financing for them. The old-age, surviving dependents’ and disability insurance in Switzerland is the most important element of the Swiss social security system. Its financial stability is in danger because age groups with a high birth-rate (“baby boomers”) will soon be reaching retirement age, coupled with longer life expectation and extremely low interest rates.

Everything will now stay as it was and the much discussed systemic problems remain unsolved. Most notably, the retirement age (with only limited flexibility for earlier or later retirement) remains unaffected at age 64 for women, respectively at age 65 for men. In addition, the minimum conversion rate for the mandatory part of the occupational plan remains at 6.8 %, which results in pensions that are – from an actuarial perspective – probably too high. The reform is therefore only being put off to a later date, and the government will have to tackle it again as soon as possible.

Decrease in VAT rates in Switzerland effective from January 1st, 2018
The temporary additional financing of disability insurance (IV) from VAT funds will expire on December 31st, 2017, and an increase in the VAT rates to finance the railway infrastructure (FABI) will come into force on January 1st, 2018.

An additional increase in the VAT rates for pension funding purposes was rejected in a federal popular vote on September 24th, 2017 together with the “pension reform 2020”. If the majority of people and cantons had voted in favour of the federal act on the 2020 pension reform and the federal decree on additional funding for OASI pensions by increasing the VAT rate, all VAT rates would have remained unchanged.

The standard VAT rate and the special VAT rate for accommodation decrease on January 1st, 2018. The reduced VAT rate remains unchanged. Now, only very little time remains to implement the necessary changes by January 1st, 2018, say Ecovis’ experts.

Author:
Marcel P. De Boni, Bsc in Business Administration, Certified auditor, Licensed Audit expert, managing director, ECOVIS ws&p ltd., Zurich, Switzerland, marcel.deboni@ecovis.ch

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