On March 3, voters in Switzerland approved a plan to offer higher pensions via a 13th month of payment. Here’s what you need to know about the 13th month of pension, how it will be funded and when pensioners will start to benefit.

What you need to know about the 13th month of pension

The Initiative for a 13th AHV pension is a plan designed to give the elderly a 13th month of pension payment every year. This has been likened to the 13th month of salary offered as part of some jobs in Switzerland.

The proposal was backed by 58,2 percent of Swiss voters at a poll on March 3, meaning that despite opposition from the government, the plan will go ahead. Here’s a guide to what will happen next, who will benefit from the plan and when people will start to receive a higher pension.

How will the 13th month of pension in Switzerland be added?

The 13th month of the pension will be added to Old Age and Survivors' Insurance (OASI), also known as AHV or a first pillar pension. OASI is a mandatory scheme which all residents of Switzerland must pay into until they reach retirement age. The amount paid each year is determined by salary or freelance earnings, although those claiming unemployment benefits or welfare still have to pay a set amount each year.

Who can apply for the 13th month of OASI Swiss pension?

All residents of Switzerland, whether they hold residence permits or are citizens, can claim OASI once they reach the age of retirement. This means that every person over 65 years old in the alpine nation stands to benefit from the 13th month of pension.

How much will pensions increase?

Currently, OASI payments for individuals vary between 1.225 and 2.450 francs a month, and up to 3.675 francs a month for those who are married. Payments are determined by how much a person earned while they were working and how long they paid into the scheme. 

Under the 13th month of pension plan, everyone’s first pillar pension payments will rise by 8,3 percent. The extra month of pension will be paid out in December every year.

When will the 13th month of AHV begin?

As stated in the referendum text, the 13th month of pension will begin to be paid out in 2026. Speaking to 20 Minuten, Federal Councillor Elisabeth Baume-Schneider (SP) confirmed that all pensioners will receive higher payments from December 2026.

Who will pay for the higher pensions in Switzerland?

As soon as the results came in, many were wondering how the cost of the extra pension, estimated to be 4,1 billion francs in 2026 and 5 billion francs every year after that, would be paid for. The text of the referendum itself leaves the issue of funding up to the government to decide, meaning it will ultimately be the Federal Council and parliament who will decide how to pay for it.

Swiss parties divided over how to pay for higher pensions

Speaking to reporters, Baume-Schneider said that they would explore all possibilities, but speculated that a rise in VAT or an increase in salary contributions towards pensions would be the first ports of call. This is also the point of view of the Green and Social Democratic Parties, with SP co-president Mattea Meyer arguing that this would pay for the plan fairly as higher earners would contribute more.

However, the Swiss People’s Party (SVP) announced that they were against this approach, and instead argued that the plan could be paid for by scrapping aid budgets to Ukraine. SVP National Councillor Lars Guggisberg told 20 Minuten that the government plans to spend 6 billion francs on Ukraine aid, more than enough to pay for the higher pensions. “That’s the solution, it’s on the table,” he noted.

For their part, FDP. The Liberals said that they were washing their hands of the issue. “The left is responsible for this dishonest manoeuvre and must propose solutions,” they wrote in a statement. The Centre said that they were also not keen on tax rises to pay for the plan. 

Finally, the Evangelical People's Party called for an inheritance tax on the super-rich to be used. “Further reform steps must not place an even greater financial burden on the younger generations, especially families, with higher VAT or wage percentages,” they wrote.

Federal Council to create plan to increase pensions by end of 2024

The Federal Council is set to debate the 13th month of pension plan over the next few weeks. They are expected to announce how they wish to proceed with the referendum by the end of 2024.

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