The payout of the 13th month of pension – 13. AHV-Rente – means that the AHV fund, the largest of the three Swiss first pillar social security funds managed by Compenswiss, will have to invest more in bonds to generate liquidity.
The AHV fund must be able to ensure to a greater extent the liquidation of invested assets to have funds available earlier if necessary, as it is unclear whether when, and to what extent, additional financing will be available for the 13. AHV-Rente, said Veronica Weisser, head of the UBS Retirement Innovation Hub.
“This implies that the AHV fund has to invest more in government bonds, which overall reduces return potential,” she added, speaking with IPE on the main impacts of the 13th month of pension approved in a referendum in March.
The AHV fund “will empty faster or slower” depending on how quickly and to what extent an increase of income, for example through higher value-added tax (VAT) or taxes on wages, or a reduction of expenses, for example by increasing retirement age, is decided, Weisser said.
She added: “Politically, it seems more likely that the AHV fund will be dismantled more quickly, also because an investment strategy with a higher degree of liquidation [of investments] is likely to bring less return.”
The Swiss government (Federal Council) has decided to finance an 8.3% increase annually in terms of pensions from 2026 only by increasing VAT.
“Financing the 13. AHV-Rente with higher VAT, as proposed by the Federal Council, means a lower standard of living for the population from age zero to retirement age, and a higher standard of living in retirement age”, Weisser said.
Weisser has authored a study, conducted in partnership with the research institute for Generational Contracts of the Albert Ludwig University of Freiburg (FZG), concluding that the present value of AHV’s pension promises, including the 13th month of pension, exceeds the present value of future income of the first pillar by 177% of Swiss GDP in 2021.
According to the study, this means that the AHV financing gap amounts to more than CHF1.35trn (in prices from 2021).
The study analysed all future income of AHV coming from contributions, wage growth, VAT and public budget, and future benefits promised, based on current legislation. Without the 13th month of pension, the AHV’s financing gap is around 101.8% of GDP or CHF760bn, the study added.
“The financing gap can be understood as the amount that would have to be available in the AHV fund today in order to be able to cover all statutory pension promises in the future, without future reforms such as retirement age, or contribution or VAT increases,” Weisser said.
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