Swiss push to raise retirement age

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Swiss push to raise retirement age

By Marc Wolfensberger, Australia Financial Review

May 27, 2003

Bloomberg - Swiss President Pascal Couchepin wants to increase workers' retirement age by two years to 67 and decrease payments to retirees to help narrow the country's widening pension deficit.

The state pension plan, whose 11th revision is being discussed by the government, is struggling to cope with payments as life expectancy rises, birth rates decline and stock prices slump. The ratio of workers to retirees will be three to two in 2040 compared with three to one today, the statistics office estimated.

"If one considers that life expectancy has increased and that retirees' health has noticeably improved, this increase is absolutely legitimate," President Couchepin said.

Mr Couchepin is proposing to sever the link between pension payments and salary increases. Retirees' pensions are now annually adjusted to both inflation and the average pay rises that workers receive. The changes would be phased in through 2040.

The country would have to increase the value-added tax by 3.8 percentage points at current contribution levels to compensate for the shortfall until 2025, said the Interior Ministry, which Mr Couchepin oversees.

The parliament is already discussing increases ranging from 0.5 to 1.5 percentage points. The government hasn't yet published a Swiss franc figure for the pension deficit.

Mr Couchepin's recommendations would cut by almost half the required VAT increase. Switzerland's value-added tax rate is 7.6 per cent, lower than the 20 percent in neighbouring Italy, 19.6 per cent in France and 16 per cent in Germany.

More than 100 protesters from the Swiss Union for Construction and Industrial Workers, or GBI, the country's largest labor union, greeted Mr Couchepin as he approached a briefing.

"Couchepin, step down. Couchepin, step down," they chanted. Mr Couchepin became president this year. The country's seven federal councillors take a turn as president each year.

About 3 million people, or close to half of Switzerland's 7.3 million residents, have pensions through their employers in addition to state plans.

"A cut in payments to retirees has positive effects," the statement said. "Households, with the prospect of receiving lower pensions, would work longer and make savings."

Swiss women have 1.28 children on average compared with 2.05 in 1970. To increase the population, women would have to bear 2.1 children, statistics showed.