On 25 September 2022, the Swiss population and cantons adopted the reform to stabilize the Swiss Old Age and Survivors Insurance (AVS 21). The new provisions enter into force gradually since 1 January 2024. The increase of the retirement age (reference age) for women from 64 years to 65 years is one of the key points of the AVS reform 21.
When will the retirement age of 65 years apply to women?
The reference age for women will be increased in four steps of three months each from 64 years to 65 years. The increase starts one year after the entering into force of the AVS reform and as a result, the reference age increases by three months on 1 January 2025 for the first time. Concerned by this increase are women born in 1961. For them, the reference age is 64 years and three months. The second increase concerns women born in 1962 (reference age 64 years and six months). Steps three and four concern women born in 1963 and 1964 and thereafter. Consequently, the reference age of 65 years generally applies as of the beginning of 2028.
Not concerned by the increase of the reference age are women born in 1960. Women of the so called “transitional generation” (born in 1961 until 1969) receive a financial compensation for the increase of the reference age.
What needs to be considered regarding the increased flexibility to receive retirement benefits?
Another key point of the AVS reform is the increased flexibility to receive retirement benefits.
According to previous law, the AVS retirement annuity could only be received on or two years earlier in case of an early retirement and the entire benefit had to be drawn.
Based on the AVS reform, men and women may receive their retirement annuity between age 63 and age 70, starting from a freely selectable month. In case the retirement annuity is received before the reference age 65, the annuity is reduced. In case the retirement annuity is received later, a premium applies. It is now also possible to receive only part of the retirement annuity earlier or to postpone it with the aim to facilitate a gradual transition from working life to retirement. The share may be chosen freely from 20% to 80% and may be increased once.
It is also new that men and women who continue working after having reached the reference age may increase their retirement benefit under certain circumstances or fill in “contribution gaps”.
Do the above mentioned changes also apply to occupational benefit plans?
Yes, the unification of the reference age to 65 years as well as the increased flexibility to receive retirement benefits also apply in the field to occupational pension plans. However, many pension funds already provided for an early benefit of retirement benefits by means of partial retirement.
Does a partial retirement lead to tax savings?
A gradual retirement may lead to tax savings, provided that the pension benefit is received in the form of lump sum payments instead of an annuity. Several lump sum withdrawals generally lead to a lower tax burden than one high withdrawal. However, certain conditions need to be met that such partial withdrawals are fiscally accepted. The practice varies in different cantons.
The AVS reform increases the options. Consequently, when planning a partial retirement, it becomes even more important taking into account the tax implications, apart from other considerations.