The minimum payout of the state scheme will rise to 1,225 francs ($1,230) per month from 1,195 francs, while the maximum payout will increase to 2,450 from 2,390 francs.

Minimum contributions for self-employed people will rise to help pay for the increase.

The government reviews pensions every two years, with the intention of adjusting pensions and disability benefits in line with price and wage levels.

Switzerland is experiencing its highest inflation since 1993, with the government expecting prices to rise 3% this year and 2.3% next year, while average wages will increase 2%.

"This results in a mixed index of 2.5% and leads to a pension increase that almost completely offsets inflation," the government said.

Finance Minister Ueli Maurer, who is stepping down at the end of the year, has previously ruled out additional government support for consumers wrestling with higher living costs such as more expensive energy.

"Petrol prices are affordable in wealthy Switzerland," Maurer said in an interview earlier this year.

In addition to state pensions, the Swiss pension system is based on occupational schemes and also voluntary contributions to private pensions.

The increase in pensions will increase Switzerland's pension bill by 1.2 billion francs per year, the government said, with the central government picking up around a fifth of the extra cost.

(Reporting by John Revill; Editing by Nick Macfie)