1 AHV 21 reform – changes in the AHV

1.1 Introduction

The AHV reform embraced by the Swiss voting population will enter into force on January 1, 2024, and comprises the following changes:

• Gradual increase in the normal retirement age for women from 64 to 65 years old
  • There are transition provisions for women born between 1961 and 1969: They can decide between compensation by means of a payment or an advance withdrawal of their pensions.
• Greater flexibility upon retirement
• Contributions paid in after the age of 65 are set to count toward an individual’s pension, provided that the maximum pension amount has not already been reached.
• Increase in valued added tax (the AHV receives a percentage point of value added tax for demographic compensation):
  • the normal rate is now 8.1% (previously 7.7%)
  • the special rate for accommodations is now 3.8% (previously 3.7%)
  • the reduced rate is now 2.6% (previously 2.5%)

The first increase in the retirement age for women amounts to three months and will be implemented in 2025. From 2028 onward, a standardized reference age of 65 years old shall apply for both men and women. Below, we will take a look at the individual points in greater detail.

1.2 Increase in the retirement age for women

As at January 1, 2028, the normal reference age for men and women shall be 65 years old. Women born between 1961 and 1969 shall be considered as belonging to the transitional generation. The reference age for women will be gradually increased from the current age of 64 years old to the new age of 65 years old. The impact of this increase will be lessened for women born between 1961 and 1969 (transitional generation) in the form of compensation. Women from the transitional generation will benefit from either a lifelong supplement of their AHV pension or from lower reduction rates when making an advance withdrawal from their AHV pension.

The supplements and the reduction rates are graduated in line with the individual’s age and income category. The values can be viewed online at: www.bsv.admin.ch/ahv21.

1.3 Flexible drawing of pension

The AHV 21 reform provides people with the opportunity to make a partial advance withdrawal of their pension or to defer drawing their pension. The minimum percentage of a pension that can be withdrawn in advance or deferred is 20% and the maximum is 80%. An individual may only increase the percentage that can be withdrawn in advance once. Afterwards, the remaining share of the pension must be drawn in full.

If an individual opts for a deferral, they can likewise only increase the share of the pension being drawn once. Afterwards, the remaining share of the pension must be withdrawn in full.

1.4 Incentives to continue working past the age of 65

From 2024 onward, AHV contributions paid in after an individual’s 65th birthday will be taken into consideration when calculating their pension. Individuals that opt to continue working beyond the reference age can now waive the exemption of not having to make AHV contribution when earning below a set amount (currently CHF 1,400), which means that they can pay AHV contributions on gross salaries below this amount. By doing this, they can increase their AHV pension.

2 Impacts of the AHV 21 reform on the Bayer Pension Fund Switzerland

2.1 Reference age

The Bayer Pension Fund Switzerland has already defined in its pension regulations the normal retirement age for men and women as 65 years old. As part of the AHV 21 reform, the term “normal retirement age” will be replaced with “reference age” in the next version of the regulations published on January 1, 2024.

2.2 Flexible drawing of pension

The Bayer Pension Fund Switzerland pension regulations have permitted individuals to take partial retirement for a number of years. It has also been possible to defer drawing retirement benefits, provided that the employment relationship with the employer continues beyond the retirement age.

From January 1, 2024, the number of lump-sum withdrawals possible should an individual take partial retirement will rise to three from the current level of two.

2.3 Conversion rates for men and women valid until December 31, 2023

Different conversion rates are defined for men and women in the current version of the pension regulations.

The values in this table are provided for informational purposes. The conversion rates published in the pension regulations are binding. For information regarding the conversion rates for people aged 66 and older, please see the pension regulations 2023

2.4 Conversion rates for men and women valid from January 1, 2024

As part of the AHV 2021 reform, the Board of Trustees has decided to align the conversion rates for men and women as of January 1, 2024. There are, however, special provisions for women belonging to the defined transitional generation. The conversion rate set out in the pension regulations 2024 shall continue to apply for this group of people (women born in 1964 and older). Women born between 1965 and 1969 will be partially compensated for the reduction of the conversion rate. The Board of Trustees opted for this compensation, as women born in these years will also receive a supplement to their basic AHV pension, unless they decide to make use of the option to make an advance withdrawal from their retirement pension.

2.4.1 Men and women not subject to the transition provisions as well as the transitional generation of women born in 1964 and earlier

The values in this table are provided for informational purposes. The conversion rates published in the pension regulations are binding. For information regarding the conversion rates for people aged 66 and older, please see the pension regulations 2024 (definitive version not yet available).

When calculating the retirement pension, the entitlement to a retirement pension shall persist at all times in accordance with Art. 53 of the pension regulations. This affects employees who were aged 50 and over and were insured with the pension fund on December 31, 2016.

2.4.2 Women born between 1965 and 1969

The new conversion rates shall apply for women born between 1965 and 1969 from 2024 onward. They will, however, receive partial compensation for the conversion rate upon their retirement. The compensation shall strike a balance between the lower conversion rates valid from January 1, 2024, and those valid until December 31, 2023. The compensation shall be calculated on the basis that women born on January 1, 1965 shall receive 100% compensation, with this amount being decreased linearly all the way down to 0% for those women born on December 31, 1969. The calculation is carried out to the exact month.

The following table provides an overview of the range of conversation rates according to the year and month of birth:

The values in this table are provided for informational purposes. The conversion rates published in the pension regulations are binding.

Examples:

• Conversion rate for women born in July 1967 at the reference age of 65: 5.47%
• Conversion rate for women born in March 1969 at the reference age of 65: 5.42%

If you have any questions, our contacts at Kessler Vorsorge AG (Tel. 044 387 87 72, pension.bayer@kessler.ch) will be happy to help.

Yours sincerely,

Bayer Pension Fund Switzerland

Pascal Bürgin, President

Yves Windhäuser, Vice President