The federal government’s billion-euro correction is causing drama and irritation. Large funding gaps and painful measures are still to be expected. The most important questions and answers.
Have to explain themselves: Stéphane Rossini (l.) and Bruno Parnisari, the director and chief mathematician of the Federal Social Insurance Office.
Peter Klaunzer / Keystone
So, what is the case now? That is probably what many people who watched the SRF “Tagesschau” on Wednesday asked themselves. Suddenly it was announced that the federal government had miscalculated the AHV by 14 billion francs. The day before, however, there had been talk of a difference of 4 billion – and this was embarrassing enough. Is everything even more dramatic now? An overview of the most important questions.
How do 4 billion suddenly become 14?
Short answer: by simple addition. Longer answer: The 4 billion francs refer to a single year (2033). According to the new figures, AHV expenditure this year is 4 billion lower than previously assumed (a total of 67 billion instead of 71 billion). However, because the incorrect formulas were logically also applied to the years before, expenditure in those years also had to be revised downwards. The Federal Social Insurance Office (FSIO) pointed this out on its own initiative on Tuesday and made the corresponding adjustments. Graphics published. If you cumulate the differences between the years 2024 and 2033, you get the 14 billion reported by the “Tagesschau”.
Which number is relevant?
The 4 billion is certainly meaningful. How the annual expenditure of the AHV changes directly influences the financial requirements of the social security system. To put it simply: if expenditure is one billion lower in a certain year, the AHV needs one billion less in wage contributions and taxes that year. The statement about the 14 billion, on the other hand, is not very helpful – especially because the period is completely arbitrary. Imagine if the BSV had chosen a different time horizon, for example if it had only presented figures up to 2030, citing medium-term uncertainties. Then, according to “Tagesschau” logic, the office would only have to face accusations of having miscalculated by 4.4 billion. If, on the other hand, it had published figures for a longer period up to 2040, as it did in the spring, the cumulative deviations would assume even more exorbitant proportions.
Which figures are crucial for the future of the AHV?
There are primarily two. Firstly, the annual contribution result. This shows whether the AHV is stably financed. It corresponds to income minus expenditure. This does not take into account income from the capital of the AHV fund; this can make a contribution in good stock market years, but is not crucial for solid financing of the social security system. Secondly, the status of the AHV fund. This shows how large the social security system’s reserves are. In general, the AHV gets by with relatively small reserves because it is financed using the contribution system – the money flows from the working population to the retired in real time. Such a “continuous flow heater” needs the reserves above all to be able to ensure permanent liquidity – so that all compensation funds across the country can pay out all pensions on time, month after month. At the moment, this is 4.2 billion francs a month.
How will the allocation results change in the next few years? And what does that mean for all of us?
Because expenditure is growing less rapidly, the contributions are also better. But better does not mean good. Even according to the new figures, it can be assumed that the AHV will immediately incur its first contributions deficit after the introduction of the 13th pension in 2026. This year, a shortfall of 580 million francs is expected (previous assumption: 790 million). In the following years, the funding gaps will increase, although less than previously assumed. In 2033, the expected deficit will be 4.2 billion (previous assumption: 7.5 billion). This significantly reduces the need for restructuring, but it does not disappear. The conceivable measures are all unpopular: higher wage contributions, higher taxes, higher retirement age, reform of widows’ pensions, opening up new sources of income. Whatever politicians decide, the measures must be implemented less quickly and less rigorously. They are still painful enough: if the financing gap is to be closed through VAT alone, for example, the standard rate will probably have to be increased from today’s 8.1 percent to 9.2 percent by 2033.
Can the Federal Council and Parliament now simply wait?
Not very long – at least if they want to comply with the legal requirements. The law stipulates that the level of the AHV fund must “as a rule” not fall below 100 percent of annual expenditure. According to the new figures, this limit will be just undercut from 2027. However, the wording of the legal requirement leaves a certain amount of leeway, which Parliament is likely to use. According to federal experts, however, one should not wait too long. Because the trend is still clear: without countermeasures, the deficits will increase over the years and increasingly erode the fund. And: the longer one waits, the more money will have to be injected later, or the more the benefits will have to be reduced in order to subsequently get back to 100 percent. This means that the burden will be shifted even more onto future generations.
How do the new figures affect the AHV fund?
On Thursday, the BSV released updated figures on the development of the AHV fund upon request, but stressed that these are provisional. They are based on previous calculations, with only the expenditure being adjusted to the corrected data. The fund should initially increase thanks to the additional financing decided in recent years and, above all, thanks to the “AHV 21” reform. In 2025, it should be at 108 percent. After that, however, things will go downhill due to the wave of retirements of the baby boomer generation and the 13th pension. This will be introduced in 2026. One year later, the fund is expected to fall below the legal 100 percent limit.
After that, the capital continues to decline with each annual loss if parliament remains inactive or the people reject reforms. A comparison of the old and new figures suggests that politicians have two or three years’ time. The more the capital declines, the more its earnings potential also declines. At some point, which no one wants to name exactly, things get tricky because liquidity is at risk. In this case, emergency measures such as federal subsidies would probably be an issue.
How could things continue now?
To put it simply, there are two camps: the left and the center are quickly planning separate financing for the 13th pension via higher VAT or wage contributions. The FDP and SVP only want to discuss additional income as part of the next comprehensive reform proposal. This approach would probably require the Federal Council to present this reform earlier. If it takes its time until the end of 2026 as planned, the measures and the entire process from consultation to voting will probably take effect so late that the AHV fund could find itself in a difficult situation.
