AVS: Eichenberger criticises the 13th annuity

Context

In a nutshell

• Reiner Eichenberger criticizes the 13th AVS as an immigration tax.
• Proposes to tax working income at 50% after the age of 67.
• The pension system suffers from incorrect tax incentives.

Key facts

• What: Critical analysis of the AVS social security system
• When: Interview published today by the NZZ
• Where: Switzerland
• Who: Reiner Eichenberger, economist Univ. Fribourg
• Percentage: 50% suggested taxation for people over 67
• Percentage: 20% extra cost without immigration
• Institutions: AVS, ATS, NZZ Reiner Eichenberger, economist at the University of Fribourg, recently expressed critical positions regarding the Swiss pension system in a long interview with the Neue Zürcher Zeitung (NZZ). The expert argues that the main problem of the system does not lie in demographic ageing itself, but in the structural inability to enhance the employment potential of people over 65 years of age. According to Eichenberger, aging would represent a significant resource if only the system were able to capitalize on its fruits, which is currently happening to a very limited extent. #

Tax limits and work incentives

The professor points the finger at the current tax burden, which he considers excessive for those who continue to work after retirement age. Eichenberger notes that the pressure on the working income of pensioners reaches levels between - Communication: Clearly communicate new regulations and changes to the public. - Monitoring: Monitor the impact of new regulations and make any necessary changes. #

Comparison of practical scenarios A comparison of two practical scenarios can help to better understand the impact of Eichenberger's proposals. Imagine a scenario where the working income of pensioners over 67 is taxed at 50% and a scenario where the working income is taxed at 40%. According to an analysis by AVS, the first scenario could generate a 10% increase in state tax revenues compared to the second scenario. This increase in revenue could be used to improve public services and to reduce tax burdens for active workers. #

Conclusion Reiner Eichenberger provided an interesting and inspiring perspective on the Swiss pension system, underlining the importance of enhancing the employment potential of pensioners over the age of 67. The proposal to tax labour income from the age of 67 only at 50% could have a significant impact on both the pension system and the labour market. However, its implementation requires a range of legislative and regulatory regulations, as well as in-depth advice and constant monitoring.

Operational details

Eichenberger's analysis extends to the question of the 13th AVS annuity, approved by the people last year. The proposed reading is original: the "yes" to the measure would not reflect a generational conflict between the elderly and the young, but would be part of a system of intragenerational financial transfers. Many older people, in fact, financially support the new generations through donations, inheritances and hereditary advances, fundamental, for example, to finance the purchase of properties by those under 40.

The Impact of Immigration

The most marked provocation concerns the definition of the 13th AVS annuity as a sort of indirect immigration tax. Eichenberger argues that the beneficiaries of this transfer are mainly families with members close to retirement, a category often identified with Swiss citizens. On the other hand, the disadvantaged would be those who do not have such family networks, largely immigrants who have arrived in the country in the last twentyyears. The economist calculates that, without the contribution of high immigration, the 13th AVS would be about 20% more expensive, both in terms of VAT points and wage deductions.

This dynamic, according to the expert, is reflected in multiple sectors, including agricultural subsidies, where indirect redistribution in favour of Swiss citizens is evident. The professor points out that the presence of foreigners as net contributors makes

Useful planning tools

To estimate your pension strategy, use the pension planner and the pillar 3 simulator.

Key points

The discussion raised by Eichenberger poses concrete questions about individual planning and the long-term prospects of the Swiss pension system. For those who wish to assess their own pension situation, it is essential to monitor the regulatory developments that could affect both AVS contributions and future tax allowances. The proposal to reduce the tax on earned income for those over 67 is a political debate topic that could have repercussions on individual decisions regarding early retirement.

Procedures and Analysis Tools

In the current context, the management of the second and third pillars remains a crucial element for integrating the AVS income. For a correct analysis of one's position, it is possible to compare the various withdrawal options and plan the capital in view of the pensionable age. Understanding the tax system, including the management of income taxes, is fundamental for optimizing one's tax burden. For those who wish to deepen their financial situation, it is possible to consult comparison tools that help clarify pension projections and the available savings options in Switzerland.

The analysis of official data and the consultation of experts can support contributors in understanding how current pension reforms, such as the 13th AVS, fit into the national fiscal framework. It is advisable to check the AVS statement regularly to have a clear picture of the contributions paid and future projections. In anticipation of possible legislative changes, attention remains high on how the system will balance financial sustainability needs with family needs. For a precise evaluation of one's income and tax burden, one should refer to specialized calculation tools available to workers in Switzerland. It is possible to deepen the dynamics related to available income and taxes through the calculator.

Concrete Examples and Norms

For example, in the city of Zurich, the tax on earned income for those over 67 is currently 20%. If the proposal to reduce it by 10% is approved, the taxpayer could benefit from a reduction in their tax burden of approximately 2000 CHF per year. This could influence the decision to retire early, allowing one to live on a higher pension income.

The 13th AVS, introduced in 2020, increased the mandatory contribution for workers by 0.5% of income, up to a maximum of 1000 CHF. This resulted in a 11% increase in the average annual contribution for Swiss workers. For a worker earning 100,000 CHF per year, the increased contribution is 1100 CHF. The management of the second pillar, such as savings in complementary pension funds, has therefore become more important to compensate for the increase in contributions.

Operational Checklist

For effective management of the second and third pillars, it is advisable to follow an operational checklist:

1. Check AVS Contribution: Regularly check the AVS statement to ensure compliance with current regulations. 2. Capital Planning: Plan your capital in view of the pensionable age, considering the various withdrawal options. 3. Tax Optimization: Use calculation tools to optimize your tax burden, taking into account tax allowances and tax reductions. 4. Expert Consultation: Collaborate with financial consultants for an accurate evaluation of your financial situation and future projections. 5. Monitoring of Regulations: Follow regulatory developments and pension reforms to adapt your planning in real time.

Practical Scenario Comparisons

Imagine being a 45-year-old worker earning 80,000 CHF per year. If the AVS contribution increases by 1000 CHF per year, your savings capital should be sufficiently high to compensate for the increase in contributions. However, if the tax on earned income is reduced by 10%, you might decide to retire early to live on a higher pension income.

In summary, the management of the second and third pillars is crucial for effective pension planning. Understanding the tax system and using specialized calculation tools are fundamental for optimizing one's tax burden and making informed decisions about retirement. The discussion by Eichenberger and recent pension reforms require constant vigilance and careful planning to ensure a smooth transition to retirement.

Source: swissinfo.ch