You ask - we answer

Pension provision is complex but doesn't have to be complicated. Nils Aggett, responsible for retirement planning at UBS, answers your questions about pension provision.

October 15, 2013

Can I continue to pay money into pillar 3 in the year of my retirement?
Yes. You can pay into pillar 3a until you reach ordinary retirement and for up to five more years if you work longer. You must pay in the amount (in 2013 a maximum of CHF 6,739 if linked to a pension fund) prior to effective retirement. Whether you retire in January or December is irrelevant. For example, if you turn 65 in May then you can pay in the maximum amount, withdraw your pillar 3a assets and still deduct the last payment in the calendar year from your taxable income.

Insurance solutions do not normally allow you to make any more payments in the last year prior to ordinary retirement. In this case you can make your pillar 3a payment at a bank.

What are the consequences of divorce for my pension provision?
The pillar 2 assets are split between the spouses following divorce. This also applies to registered partnerships. Only the share of the vested benefits accumulated between marriage and divorce is split. If both you and your spouse have pillar 2 assets, then only the difference is split. If you have used your personal property to buy into the pension fund during the marriage, then this is excluded from the asset split. If one of the spouses is retired or disabled, the retirement assets are not split and the court is obliged to rule on pension compensation. The court likewise rules if you are unable to agree on the split of vested benefits.

Spouses can also voluntarily forego a split in part or in full as long as the provision of retirement and disability benefits is guaranteed. The divorce court can in turn refuse to split the assets if this clearly puts one spouse at a disadvantage. The divorce settlement is transferred to the spouse's pension scheme or to a vested benefits account or policy. If a gap in your pension cover arises due to divorce then you can close this again by buying into your pension fund.

When should I start planning for early retirement?
Statutory pension provision - the Federal Occupational Retirement and Survivors' Insurance Scheme (AHV) and the obligatory part of the pension fund - only covers around 60 to 70 percent of previous salary income on ordinary retirement. An even greater income gap arises on early retirement. It is therefore particularly the case here that the earlier you start planning, the better. Why?

If somebody retires at normal retirement age, he or she will be entitled to the pensions from pillars 1 and 2. This is not the case with early retirement. If you wish, you can draw your AHV pension up to two years before reaching retirement age. However, you will pay a significant price for this. The pensions of men and women are reduced by 6.8 percent for each year of early retirement. Even if early retirees are already drawing pensions, they still have to continue making AHV contributions until they reach ordinary retirement age. The wealthier an early retiree is, the higher these contributions. A careful review must therefore be carried out in each individual case as to whether drawing on the AHV pension in advance pays off overall.

The financial consequences for the pension fund are even more far-reaching. While it is possible to draw on the benefits five years before reaching ordinary retirement age (although no earlier than age 58), the pension is reduced by around seven to eight percent for each year of early withdrawal. So if you'd like to retire early, you should talk to experts such as those at UBS at an early stage. This will enable gaps in provision to be identified and strategies developed to save up the shortfall.

Do you have other questions about pension provision? Nils Aggett, responsible for retirement planning at UBS, would be happy to answer them. Write an e-mail to