Pension If you divorce, don’t forget your pension

A divorce will affect the financial situation of both partners. You’ll need to think about your pension too.

by UBS Insights 16 Jul 2019

Photo: UBS

Two out of every five Swiss marriages ends in divorce. This usually leads to a new pension situation. The rules concerning personal property, acquisitions, early withdrawal and pensions can be complicated – the 50/50 principle generally applies.

With regard to pensions, first the AHV and pension balances must be split. In most cases, the assets built up during the marriage are split equally. Note that those assets present before the marriage are not affected. Pension funds are divided regardless of the matrimonial property scheme.

Next, an inventory should be taken: what assets do you have, how much money do you need to live on – both while you’re still working and after you retire? If there are any gaps, you’ll need to come up with a plan for your pension.

Pillar 1

For pillar 1 (AHV), the splitting of income ensures that any insurance cover is split equally between the parties. If, immediately after divorcing, you do not request the AHV to be split, the compensation funds automatically do so at the time of pension calculation.

Pillar 2

In the case of pension fund assets, the date on which divorce proceedings were initiated is the date used for the split. If only one spouse has pillar 2 assets, the assets acquired during the marriage are split 50/50. If both partners have such pension assets, each will have a claim to one half of the other partner’s assets built up during the marriage. If one of the parties does not belong to a pension fund, the money is transferred to a vested benefits account at a bank or to a vested benefits insurance policy.
For pension money withdrawn in advance during the marriage, the 50/50 principle also applies. If, for example, the capital was used to buy a home together, this advance will be considered when calculating how to divide up the pension pot.

Pillar 3

Contributions under pillar 3a are usually made from earned income. Here too, the 50/50 rule generally applies.

Additional pillar 2 contributions

Since married couples seldom have identical pension pots, the pensions of both persons are usually affected after a divorce. You should reassess the situation – new pension requirements may now arise. It’s advisable for the partner whose pension pot has been reduced due to the divorce to buy into pillar 2. Such purchases to make up the original balance are subject to tax relief and can considerably increase the pension.