The Swiss Federal Social Insurance Office (FSIO), responsible for overseeing and further developing the first and second pillar pension systems, has reviewed the financial outlook for the first pillar AHV fund after a mistake that overestimated its expenses.

The updated version of the financial outlook for the first pillar AHV fund points to expenses amounting to approximately CHF69bn (€73bn) in 2033, in the middle range of a CHF70-72bn estimate by the Swiss Economic Institute (KOF), and demographic projections of between CHF68-70bn, the FSIO said.

This is around CHF2.5bn less than the outlook published with the consultation conducted to find ways to finance the 13th month of pensions, which pointed to expenses of around CHF71.5bn in 2023, the Office added.

In recent weeks the FSIO has refined its models to calculate AHV’s financial outlook. The old model clearly overestimates expenses for the fund in the longer term, it noted.

The FSIO’s current outlook for the AHV for 2040 is now around CHF6bn lower than projections calculated through the old model.

The difference between AHV’s income and expenses, excluding expected investment returns, will be negative from 2026 with the introduction of the 13th month of pension, and without additional financing. This calculation is confirmed by both the internal and external spending models, with an estimated deficit of CHF5bn in 2033, it added.

The Swiss government (Federal Council) has decided to increase the value-added tax (VAT) by 0.7 percentage points to fund the measure.

The FSIO will present its AHV outlook using ranges in the future, to avoid mistakes that can hit the trust of the public in the first pillar social security funds.

The Office will also rely on several models in order to be able to check the plausibility of financial outlooks, and it will continually develop the models in order to provide a reliable basis for decision-making, it added.

The Swiss Federal Ministry of Internal Affairs intended to start an administrative investigation after pension and social security costs were overestimated by CHF4bn.

AHV’s financial outlook continues to be updated every year to take into account economic and demographic developments.

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Luigi is IPE's Berlin-based DACH correspondent. His coverage includes regulation and the latest pensions and investments trends, and, being a native Italian, he also covers Italy’s pensions market. He has reported from Italy and Germany on international politics and business for European and US publications including USA Today, Bloomberg BNA and for the investigative magazine L’Espresso. He was previously Germany correspondent for Mergermarket covering M&A.View full Profile

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