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The OASI funding gap: How can it be closed?

The OASI is coming under increasing pressure. UBS scenarios show why the funding gap is growing and which reforms could reduce it in the long term.

AHV 29 Sep 2026
Authors
Jackie Bauer Veronica Weisser

Content:

An older man walks with two children along a wooden boardwalk through a meadow, symbolising generations and retirement planning.

The main points in a nutshell

  • The OASI is financed using the pay-as-you-go system: The contributions of those currently employed directly finance current pensions. However, this system is facing growing pressure as the number of retirees increases while the ratio of working people to retirees declines.
  • The introduction of the 13th OASI pension further increases expenditure and thus widens the already existing funding gap.
  • Without reforms, the financial burden is likely to shift increasingly onto younger and future generations.
  • To ensure the long-term stability of OASI financing, a balanced mix of structural reforms is needed.

Funding gap: The OASI faces challenges

The Old Age and Survivors Insurance (OASI) is coming under increasing financial pressure. The main reason is that, over the long term, it will pay out more benefits than it can finance through contributions and other revenue. This imbalance is referred to as the OASI funding gap.

This gap is already significant today – and has become considerably larger due to the 13th OASI pension. According to a UBS analysis(PDF, 648 KB) (in German), it amounts to approximately 177% of 2021 GDP, including the additional monthly pension, which is equivalent to about CHF 1,315 billion. For comparison, without the 13th OASI pension, the gap would amount to 102% of GDP.

The additional monthly pension will increase OASI expenditure by several billion Swiss francs per year. How these costs are to be financed in the long term has not yet been determined.

Infographic showing the OASI funding gap with and without the 13th pension, highlighting its significant impact.

The infographic shows the estimated OASI funding gap as a percentage of gross domestic product (GDP), based on the year 2021. Without taking the 13th OASI pension into account, the gap amounts to 102% of GDP. Taking the 13th OASI pension into account, it rises to 177% of GDP. The chart illustrates that the 13th OASI pension significantly widens the long-term funding gap of the OASI. The estimates are based on a productivity growth of 1.1% and a real interest rate of 2.1%. Sources: BFS (Federal Statistical Office), BSV (Federal Social Insurance Office), FZG (Swiss Vested Benefits Act), UBS

Note on the data

This article is based on three UBS studies with different calculation methods. The demographic and labor-market scenarios do not yet take the 13th OASI pension into account and therefore show smaller funding gaps. What matters here is not a direct comparison with the current funding gap of 177%, but the direction and magnitude of the effects.

Why does a funding gap arise in the OASI?

The OASI is funded on a pay-as-you-go basis. In other words, contributions from today’s working population are used directly to finance current pensions rather than being saved to fund their own future retirement benefits.

This system works well as long as a large number of working people finance the pensions of a comparatively small number of retirees. However, if this balance shifts, deficits can arise because ongoing revenue is no longer sufficient to cover promised benefits over the long term. Unless these deficits are offset, a funding gap emerges.

Demographic scenarios: The pressure remains high

Demographic change is widening the OASI funding gap. People are living longer and drawing pensions for longer, while comparatively fewer working individuals are contributing to the system.

This trend is reflected in the old-age dependency ratio, which measures the number of pension recipients relative to contributors. Today, there are around three employed people for every one pension recipient. By 2070, that ratio is expected to fall to just two. 

Two factors are driving this trend: increased life expectancy and low birth rates. Migration also plays a role, as immigration affects the size of the working population.

UBS pension experts have analyzed how demographic developments could affect the OASI funding gap. The demographic scenarios in the baseline case, based on FSO projections, assume a funding gap equivalent to 88.2% of 2019 GDP:

  • Life expectancy has the greatest impact. In the baseline scenario, life expectancy is around 90 years. If it increases more than expected to almost 92 years, the funding gap widens by 39.3 percentage points. Conversely, if life expectancy increases by roughly two years less than expected, the gap is significantly smaller.
  • A higher birth rate eases pressure on the OASI. The baseline scenario assumes a future fertility rate of 1.6 children per woman. If the birth rate exceeds expectations and reaches 1.8 children per woman, the funding gap narrows by 14.1 percentage points. If it remains low at 1.4 children, the gap widens.
  • Migration also affects OASI financing. The baseline scenario assumes average annual immigration of 35,000 people over the long term. If immigration is higher than expected, at around 55,000 people per year, the funding gap narrows by 7.1 percentage points. If immigration is lower, at around 20,000 people per year, the funding gap increases accordingly.

The UBS analysis shows that even favorable demographic developments can only partially ease pressure on the OASI. They cannot solve the funding challenge on their own. Addressing the issue will require structural reforms.

Infographic showing how life expectancy affects the OASI funding gap, with higher longevity increasing the shortfall.

The infographic compares the impact of different life expectancy assumptions on the OASI funding gap as a percentage of gross domestic product (GDP). In the baseline scenario, it amounts to 88.2% of GDP. If life expectancy is higher, the funding gap increases to 127.5% of GDP. If life expectancy is lower, it falls to 49.5% of GDP. The chart illustrates that rising life expectancy widens the OASI’s long-term funding gap, while lower life expectancy reduces it significantly. The estimates are based on 2019 GDP, the 2021 population, productivity growth of 1.1%, and a real interest rate of 2.2%. Sources: BFS (Federal Statistical Office), FZG (Swiss Vested Benefits Act), UBS

Study: How demographics affect OASI financing

Would you like to know how birth rates, life expectancy and immigration affect the OASI? The UBS study analyzes a range of demographic scenarios and their impact on OASI financing.

Labor market scenarios: Higher employment can reduce the funding gap

While demographic trends can be influenced only to a limited extent by economic and political measures, labor market participation can be shaped more actively, for example through incentives that encourage more people to enter or remain in the workforce. But how much could higher employment actually ease pressure on the OASI?

In principle, higher employment can help reduce the OASI funding gap, as around three-quarters of first-pillar financing comes from wage-based contributions. The more people are employed and the more hours they work, the higher are the contributions paid into the OASI.

There is still room for improvement in Switzerland because although the labor force participation rate is high at over 80%, many people work part-time, especially women. Measured in full-time equivalents, men work an average of 85%, compared with 60% for women.

This gap typically begins to emerge around the age of 28. Until then, employment levels among men and women are broadly similar. The gap generally widens after the birth of children and tends to persist throughout the remainder of working life.

This is where the UBS labor market scenarios come in. They assume a funding gap equivalent to 89.2% of GDP.

  • Higher labor force participation among women: If the participation gap between women and men narrows, pressure on the OASI eases.
  • Full alignment of labor force participation: If women’s labor force participation reaches the current level of men’s, the funding gap decreases the most.
  • Higher labor force participation among women, lower participation among men: If women’s labor force participation increases while men’s decreases, the funding gap could actually widen. This shows that what matters is not only the number of hours worked, but also wage levels.
  • Higher labor force participation among older people: If older workers remain in the labor market for longer, this also eases pressure on the OASI, although the effect is less pronounced.

A larger workforce can therefore make a meaningful contribution to reducing the OASI funding gap. However, higher employment alone cannot fully offset the impact of the baby-boomer generation retiring from the labor market

Bar chart showing how labor market changes affect the OASI funding gap, with higher female participation reducing it.

The bar chart shows the OASI funding gap as a percentage of gross domestic product (GDP) under the status quo and across four labor market scenarios. Under the current framework, the gap amounts to 89.2%. Higher labor force participation among women: If women increase their participation in the workforce and the gap relative to men narrows, the funding gap falls to 77.9%. Full alignment of labor force participation: If women’s labor force participation reaches the current level of men’s, the funding gap declines the most, falling to 66.7%. Higher labor force participation among women, lower participation among men: If women work more and men work less, the funding gap rises to 97.5%. This shows that not only the volume of work matters, but also wage levels. Higher labor force participation among older people: If older workers remain in the labor market for longer, the funding gap falls to 85.2%. The effect is therefore smaller than in the first two scenarios. The base year is 2019. The calculations are based on a productivity growth of 1.1% and a real interest rate of 2.1%.

Study: How the labor market affects OASI financing

Would you like to learn more about the impact of higher labor force participation on the OASI? The UBS study analyzes various labor market scenarios and shows which factors have the greatest influence on the long-term financing of the OASI.

Closing the OASI funding gap: What solutions are available?

Several possible reform options are being discussed to reduce or close the OASI funding gap. UBS experts have analyzed four potential financing options. The starting point is the currently estimated funding gap of 177% of GDP, including the impact of the 13th OASI pension.

Higher payroll contributions and value-added tax

Additional revenue could help stabilize the OASI in the short to medium term. If the funding gap were closed solely through higher OASI payroll contributions, the contribution rate would need to increase from the current 8.1% to around 11.5%. This would place a direct burden on both employees and businesses. A higher value-added tax (VAT) would also have noticeable consequences, particularly for lower-income households and families with children.

Higher reference age

A higher reference age is one of the most effective policy levers. People who work longer contribute to the OASI for a longer period and begin drawing their pensions later. This eases pressure on the OASI in two ways.

According to the UBS analysis, increasing the reference age to 66 would reduce the funding gap to 138% of GDP, while raising it to 67 would reduce the gap to 100% of GDP. The effect would be even greater if the reference age were linked dynamically to life expectancy.

Adjustment of the mixed index

Today, OASI pensions are adjusted equally in line with wage and price developments. If pensions were linked more closely to prices than to wages, pension growth would slow. This could significantly reduce pressure on the OASI.

Adjustment of survivors’ pensions

A reform of widows’ and widowers’ pensions is currently being discussed in parliament. The aim is to align benefits more closely with today’s family and employment patterns. From a financial perspective, however, the impact is comparatively limited. According to UBS estimates, the funding gap would fall to 162% of GDP.

Why a mix of reforms is needed

The calculations show that no single measure can solve the OASI’s financing challenge on its own. The most effective approach would be a combination of several reforms. This would avoid the need for any one drastic adjustment and spread the burden more evenly across generations and stakeholder groups.

Study: the reforms that could secure OASI funding 

Would you like to better understand the possible policy options? The UBS study shows how significantly measures such as a higher reference age, increased contributions, or a different pension adjustment mechanism could reduce the OASI funding gap.

Frequently asked questions about the OASI funding gap

Conclusion: The OASI needs long-term reforms that are fair across generations

Under its current framework, the OASI is not financially sustainable over the long term, and the 13th OASI pension will widen the funding gap further.

  • This gap is not only a funding problem, but also a question of intergenerational fairness: Without reforms, younger generations are likely to contribute more without seeing a corresponding increase in their own future pensions.
  • Even a favorable demographic trend would only ease the pressure on the OASI, not secure its long-term stability. Higher labor force participation can reduce the funding gap, but it cannot eliminate it entirely.
  • The OASI is likely to become sustainable over the long term only through a combination of measures.

The objective of these measures should not be short-term relief, but the lasting, intergenerationally fair stabilization of the first pillar.

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