6 life situations Co-habiting? Part-time work? Pension aspects

Marriage or cohabitation? Full- or part-time work? Everyone is different. Here's what six people think about pension planning.

by UBS Insights 30 Oct 2018

Image: Maya and Daniele

Today, individuality is reflected in every phase of life. This also means that not everyone's expectations of their retirement is the same. UBS Insights talks to six individuals about their priorities and their view of financial security in old age.

Elisabeth (89)

A generation with safe pensions

“I trained as a sales assistant, but my career ended when I was 25. I got married and then the children came along. This was the norm in those days. Nobody gave much thought to retirement planning, but I did save something every year. My husband worked for the city police and was able to pay into his pension fund until he took early retirement. I earned some money on the side by offering gym classes. Today we live mortgage-free in our own house; this is our life insurance. If I could give my granddaughter Linda and other young people a tip, it would be to put some money aside for old age.”

Linda (27)

Need for self-initiative

“I’m not giving much thought to my old age just yet. However, the subject of retirement planning has come up in my group of friends before. I got some advice from my bank. It was a good conversation, but I haven’t yet put the suggestions into practice. I took a year out and didn’t know what my next step would be financially. Even today, I don’t earn enough as an assistant psychologist to save money and pay into pillar 3a. I am taking it step by step and not worrying about the future. If I can live later like my parents or my grandmother Elisabeth, I’ll be happy.”

Doris (30)

Mariage, pension and family

“I have been working as a restaurant manager in Zurich since July. In the last I was employed on cruise ships. That was where I met and fell in love with my now-husband in 2013, en route from Tahiti to Japan. He is from the Philippines, and we got married three years ago. For me it was a given that we would live in Switzerland. Switzerland is better for having children, too. We live frugally and are putting money aside with a view to starting a family one day. In addition, we both pay into pillar 3a, and my husband pays into a pension fund in the Philippines as well. We could imagine spending our retirement there.”

Claude (47)

Happy just living together

“I chose not to get married as I never felt the need to submit to a status defined by the church. I’m fine with just living together, even now that we have three children. It had very little to do with financial concerns. I actively took care of the inheritance and insurance aspects. With three children, I have hardly any money left over for extra private retirement savings anyway, apart from the usual social security. But that doesn’t bother me. My priorities are living a healthy life in the present, enabling my children to enjoy education, sports and cultural activities – and staying debt-free.”

Ariane (37)

Full-time job and family

“As a business developer, my career absorbs most of my time and energy. At the same time I’m very keen to start a family and have been thinking about our retirement plans in connection with this. I have devised a clear savings plan, but I want to be able to rely on our system, too. My attitude toward money is very realistic, even though I do spend quite a bit on shoes from time to time. Sometimes I wish that institutions like banks and insurance companies would adopt a more proactive and transparent approach towards their clients when it comes to the topic of pensions and alternative investments.”

Remo (33)

Part-time jobs pay the bills

“I’m an actor and have also discovered that I have a talent for presenting. Being the center of attention and entertaining people is something I love. I work freelance as a crowd warmer for TV, which involves warming up the audience before shows are recorded. I wouldn’t describe myself as a free spirit. On the contrary, I need a lot of security. That’s why I also work 50 percent at the welcome desk of a gym. I’m not able to save a lot, but then again, old age is still a long way off for me. My family has advised me to start thinking about pillar 3a, however.”

Secure pension or personal initiative

The first generation to benefit from financial security provided by the AHV and pension funds is now gradually reaching retirement age. The majority also have assets, thanks to the rising prosperity that accompanied the booming post-war economy. The retiring of these Baby Boomers poses major challenges for the state pension system. New models are needed that take into account the changes in society, in that part-time solutions, job sharing, patchwork families and a different work-life balance have made employment and lifestyles much more individual. This can result in a pension gap for Millennials, calling for greater personal responsibility. In other words, the sooner Generation Y and young career starters begin making private provision arrangements, the better. A long investment horizon is worthwhile, because even putting away fairly small sums will result in a higher amount in old age, given you have the right investment strategy.

Marriage or partnership

Whether a couple chooses to marry or not, either choice has advantages and disadvantages for their wallet. Marriage offers a greater degree of financial security than a common-law partnership. In the event that their spouse dies, a wife with children (regardless of age) or a husband with children under the age of 18 receives a survivor’s pension from pillar 1. However, no survivor’s benefits are provided for common-law partners when one of the partners dies, whereas pension funds may provide survivor’s benefits. The regulations of the pension fund in question will tell you whether this is provided for. This is of great benefit to parents who stay at home or work only part-time to be able to look after their children. It also makes inheritances easier to arrange. Spouses are legally entitled to inherit from each other. Common-law partners, on the other hand, get nothing in cases of inheritance. You can at least allocate the free share of an inheritance to your common-law partner under a will/inheritance contract. Spouses are exempt from inheritance and gift tax in all cantons while in many cantons people who live in common-law partnerships are often taxed at the maximum rate.

Full-time or part-time work

Pension funds are not mandatory for all employees, unlike old-age and survivors’ insurance (AHV). Only people who earn at least 21,150 francs (as of 2018) per year with one employer are required to be included in the employer’s pension fund. Employers aren’t obligated to include you in the pension fund if your salary is lower, but may do so voluntarily. Multiple part-time jobs, however, can be accumulated and handled through the pension fund of one employer. Whether or not this is possible depends on the regulations of the specific pension fund. This makes pillar 3a especially important for people who work part-time. If you are not a member of a pension fund, you can contribute up to 20 percent of your net income to pillar 3a, up to a maximum of 33,840 francs. Another advantage: Any money you pay in can be deducted from your taxable income.