Referendum looms on VAT hike to fund the state pension system
02.10.2026 – Eveline Rutz
Following heated debate, parliament has decided to increase VAT to 8.5 percentas a means of partially funding the 13th state pension payment without theworking population having to pick up the tab directly. Voters will now be asked for their opinion on 29 November 2026.
December will see the first 13th state pension (OASI) payments being made to all eligible recipients in Switzerland and abroad. The total outlay will be around 4.2 billion Swiss francs, but demographic changes mean this sum will likely rise to 5.4 billion francs by 2040. The number of pensioners increases every year. At the end of 2025, 2,635,200 people – one third of whom live abroad – were receiving OASI benefits. The figure is likely to be about three million in 10 years’ time. Costs will also increase, because pensions are regularly adjusted in line with inflation and wages.
Yet it is still unclear how the increased pension payments will be funded. The trade unions may have scored an historic victory at the polls in 2024 with their idea of a 13th state pension payment (see “Swiss Review” 3/2024), but they never addressed the financial side. Unsurprisingly, subsequent debates in parliament have been protracted and heated.
How to cover the expense? Increase pension contributions? Raise taxes? Redistribute revenue? Whatever the answer, parliamentarians from all parties wanted the result of the 2024 vote to be implemented quickly. Voters treating themselves to an additional OASI payment now had to pay for it, noted conservative politicians dryly. As the Centre Party National Councillor Thomas Rechsteiner put it: “Those saying yes to the 13th payment need to realise that it won’t come free.” The question of whether measures to help fund the payment should be temporary or permanent was another sticking point. A time-limited solution would have made the need for structural reforms even more pressing.
On a knife edge
The issue highlighted fault lines not only across the political spectrum but also within individual parties. Politicians faced pressure from their colleagues not to break rank. The outcome was on a knife edge throughout. After much wrangling, the different factions arrived at an initial compromise during the summer session: increase the standard rate of VAT by 0.4 percentage points from 2028 to cover at least part of the additional cost. The measure requires an amendment to the Federal Constitution and will, therefore, be put to the vote of the people and the cantons.
Around 2.6 million people were receiving OASI benefits atthe end of 2025. The figure is likelyto be 3 million in 10 years’ time.
The Federal Council originally suggested increasing VAT by 0.7 percentage points until 2030, but parliament had other ideas. An alliance of Centre and SP politicians dominated proceedings in the Council of States, aiming at first for a VAT increase of up to one percentage point.
The upper house revised this target after fierce criticism from the National Council, eventually settling on a 0.4 percentage point increase while also proposing higher state pension contributions. VAT is not socially equitable as an instrument in itself, argued a majority in the Council of States. People on low incomes would be hit more in comparative terms than those on high incomes, whereas pay deductions would put the onus more on higher earners. Combining both elements would provide the 13th OASI payment with a broad foundation and secure its long-term future, the Council of States concluded.
But there was opposition to this plan within the National Council. The Swiss People’s Party (SVP), the Liberals (FDP) and the Green Liberals (GLP) pushed back vehemently against the idea of higher pension contributions, emphasising that paid work needed to remain attractive, and that people earning a living already had enough to contend with. “We don’t want any further redistribution from young to old – it would be unfair on working people,” said GLP National Councillor Patrick Hässig, adding that a VAT hike was the lesser of two evils. It would mean non-earners – including pensioners and tourists – also having to pay their share. But the SVP, FDP and GLP would only countenance a temporary VAT increase. They said that shoring up pensions in the long term was the priority, requiring urgent structural reforms – such as incentives for people to stay in work for longer, or automatic stabilising mechanisms to take account of demographic trends.
Yet the GLP, unwilling to risk a funding impasse, changed tack at the very last moment and grudgingly voted in favour of a VAT hike with no time limit.
Higher prices from 2028
If voters endorse parliament’s decision, companies will have a two-year buffer before they have to adjust their prices, with consumers paying more from 2028 onwards. VAT would increase from 8.1 to 8.5 percent. A reduced rate of 2.6 percent would continue to apply to basic items like food, medication, books and newspapers, but the special rate for the hotel and accommodation sector would rise from 3.8 to four percent.
“Those saying yes to the 13th payment need to realise thatit won’t come free.”
Thomas Rechsteiner, National Councillor
The VAT increase should generate around 1.5 billion francs a year in revenue, which is not even half of what is needed to fund the additional OASI payment. None of the political parties are completely satisfied. Their ideas on how to secure the long-term viability of the state pension differ considerably. Reaching any compromise is tricky. Reaction to the Federal Council’s OASI reform proposals for the period from 2030 to 2040 is another prime example. The government wants to incentivise people to work beyond the age of 65, but has chosen not to increase the retirement age. The future of the state pension per se will soon be on the parliamentary agenda. And the debate will continue.
The 13th state pension payment
The additional state pension (OASI) payment will coincide with the normal state pension payment in December. OASI recipients will be notified in advance. People entitled to a state pension from 1 January 2026 can find all relevant details in their pension award notice. OASI recipients who live abroad do not need to take any action.
The 13th payment will correspond to one twelfth of an insured person’s annual pension. How much a person receives will depend on their pension contributions and income situation. Individuals will receive a maximum of 2,520 francs, and married couples no more than 3,780 francs. The 13th OASI payment has no bearing on supplementary benefits and is not taken into account when calculating these benefits. There is no additional pension payment for widows, widowers or orphans. Disability pension payments will also remain limited to 12 times a year.
We will review the results of the popular votes of 27 September 2026 in the next edition of our magazine.
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