The International Monetary Fund (IMF) has urged the authorities in Switzerland to advance comprehensive pension and healthcare reforms to address long-term spending pressures and strengthen the sustainability of social insurance systems.

Its Swiss Country Report, under Article IV of the IMF’s Articles of Agreement, noted that a ‘modest’ fiscal expansion was underway in the country due to the additional pension benefits, with higher pension spending expected to more than offset additional revenues from OECD Pillar 2 implementation.

The IMF stated that Switzerland faced long-term fiscal pressures from an ageing population, with longer life expectancy expected to increase the share of retirees, putting pressure on pension and health spending.

Switzerland’s first-pillar pension system was expected to weaken over time, the IMF added, as benefits outpaced contributions.

Old-age and survivors’ pensions are set to face rising sustainability risks, as while net assets totalled CHF 55bn at the end of 2024, its operating balance was forecast to “deteriorate sharply” from 2026 due to the planned 13th monthly old-age pension.

The 13th monthly payments to pensioners were approved by public referendum, and are expected to raise expenditure by 0.5 per cent of GDP in 2026, primarily financed by drawing down pension fund assets.

Pension spending was projected to increase from 6 per cent to 7.4 per cent of GDP by 2060, with net asset depleted by the mid-2040s.

“Structural reforms will be essential to sustain growth and preserve fiscal sustainability in the face of demographic change,” the IMF stated.

“The authorities should advance comprehensive pension and health care reforms to address long-term spending pressures and strengthen the sustainability of social insurance systems.

“Measures that encourage longer working lives, improve labour force participation, enhance workforce skills, and maintain openness to qualified migration will add to Switzerland’s successful labour market model.”

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