ZURICH, Feb 28 — Switzerland will hold a referendum on Sunday on whether to increase pension payments to the elderly in what looks set to be a close vote, with initial enthusiasm giving way to growing concern about how the plan should be funded.

Pitched by the Swiss Trade Union Federation and backed by left-of-centre parties, the plan to provide the elderly with a 13th monthly pension payment aims to alleviate the cost of living in Switzerland, where rents are particularly high.

Zurich, the country’s biggest metropolis, tied with Singapore as the world’s most expensive city in a study published in November by the Economist Intelligence Unit.

However, it is not clear how the pension boost should be paid for, and both the government and the Swiss parliament, which currently leans to the right, have rejected the proposal as financially risky, helping to mobilise opposition.

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Opponents argue that the plan, which would take effect from 2026, could spark tax increases or spending cuts, and would also benefit wealthier pensioners who do not need the money.

Supporters say the pension system is in sound health and the increase is both affordable and necessary.

Opinion polls late in 2023 had shown more than two-thirds of Swiss backing the pension hike, but a survey by polling firm gfs.bern last week showed only 53 per cent in favor.

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The minimum old age and survivors (AHV) pension in Switzerland is today worth 1,225 Swiss francs (RM6,629) a month, and the maximum is 2,450 francs. Couples have the payment capped at 3,675 francs. Those who cannot cover their existential needs from it can claim supplementary payments.

Voters also will have the chance to decide on a second initiative that would raise the statutory retirement age to 66 by 2033. Polling suggests that plan will be defeated. — Reuters