On 3 March 2024, Swiss voters voted on two federal initiatives on state pensions. The first asked voters whether to increase pensions by a 1/12th (8.3%), while the second asked if the official retirement age should rise slowly in line with life expectancy.
With the votes in, the proposal to increase pensions by 8.3% (1/12th), known as the 13th (month of) pension, has been accepted. 58.4% of voters were in favour of more money for retirees.
Majorities favoured the plan in 15 out of 23 cantons (of the 26 typically referred to, 6 are half cantons). The cantons with the highest percentages in favour were Jura (82.5%), Neuchâtel (78.4%), Geneva (75.5%), Vaud (74.4%) and Fribourg (72.3%), all French-speaking cantons. At the other end were 10 German-speaking cantons where the proposal was rejected. Majorities in Appenzell Innerrhoden (68.6% against), Obwalden (59.5% against), Zug (58.1%), Schwytz (57.6%), Uri (56.4%), Nidwalden (56%), Appenzell Ausserrhoden (53.7%), Luzern (53.4%), St Gallen (51.2%) and Thurgau (51.2%) rejected the idea.
In German-speaking Switzerland this vote was tight with only 52.5% in favour. Across the rest of Switzerland the same rate was 73%.
The acceptance of this initiative will cause a headache for the Federal Council. The difficult work of pension reform currently underway will now be more difficult. State pension finances are currently healthy, with significant reserves and more money coming in than going out, something those behind the initiative emphasised in the run up to the vote.
However, these figures are set to go significantly into the red in future years as the population ages. This demographic shift is inevitable and easy to model. The Federal Council has looked at the numbers and is under no illusions. The higher pensions accepted today will make funding this shift even harder.
Absent improbably high increases in productivity, economic growth and wages, only a few forces could prevent the future funding shortfall. These would be an improbably large inflow of well paid workers from abroad, far in excess of the current trickle, a higher retirement age, or higher taxes. If taxes were pushed up, those further from retirement would shoulder more of the burden. Someone just entering the workforce would almost certainly put in incrementally more than they would ever get back through higher pensions payments in old age.
Another way to undo today’s 8.3% increase would be to flatline pension payments for a number of years and let inflation reverse it. However, this would not solve the larger issue of demographic shift. It would only bring the funding challenge back to where it was before the vote. Pensioners might also spot such a ruse and protest.
The second vote aimed at increasing the retirement age, with the aim of easing impending funding challenges, was soundly rejected. 74.7% of the voting public rejected this proposal, which found a majority in no Swiss canton. Zurich and Zug came closest to accepting it. But even in these two, 69.5% and 69.9% respectively voted against the idea. In every other canton more than 70% of voters were against it. In Vaud (85.1%), Jura (85%), Neuchâtel (81.5%) and Fribourg (80.4%), more than 80% of voters rejected the proposal. This is a clear signal from voters that retiring later is an unpopular fix for the future pension funding problem.
Both votes had unusually high voter turnout of 58.3% (13th month of pension) and 58.1% (higher retirement age).
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