Expert tips on pension planning New to work – what about pension planning?

Liliane will soon enter the world of work. Until now she was a student with an occasional side job. What is her pension situation?

by UBS Insights 15 Sep 2019

Image: Maya and Daniele

Five questions to Liliane

How much confidence do you have in the state pension system?

The pension system is on shaky legs. I’m not sure whether pension provision as we know it will still exist when I reach retirement age.

What situations in life do you associate with pension planning?

I definitely associate pension planning with old age and retirement. I dream of owning my own home, but I don't know what that means for my pension planning.

How do you see retirement?

I hope I’ll be able to enjoy certain privileges in my old age: traveling, eating out, going to the theater, living in a house with a garden. Otherwise, I imagine my retirement to be modest.

Have you already done anything to avoid pension gaps?

I’m not sure what my current situation is and what I should do if I have gaps in my AHV and pension fund cover.

Do you want to work part-time or full-time? Are there specific reasons for this?

I’d like to start at 80% to 90%. A good work-life balance is very important to me. In my profession as a social educator, very few people work full-time.

Liliane sits down at the living room table and closes her laptop. “I’m currently writing my master’s thesis. But if the weather stays as nice as it is now, that’s going to be difficult,” she says with a laugh. The 27-year-old lives in the middle of Zurich, a stone’s throw from Langstrasse. “Living right in the city center is great, but owning a home in the country is what I want for the future.” There’s still a long way to go until then, says Liliane.

“I don’t think a full-time job is desirable.”

This year Liliane will finish her studies in educational sciences and gender studies while working as a social educator on a temporary basis. Next year she’ll look for a permanent job. She does not find full-time employment desirable, ideally she would like an 80 to 90 percent workload. “It’s very rare for social educators to be employed full time. Working hours are irregular and shift work can be very intensive.” A healthy work-life balance is very important to her, emphasizes Liliane. “I want to have enough time for my boyfriend, friends and family, for sport and for my passions – gardening and cooking.”

More for tomorrow

Pension planning is an issue that accompanies you in every phase of your life. Start out on the right track early on. Order our guide for young people under 35.

Pension gaps – should you start worrying about them in your mid-20s?

What about pension planning? Although Liliane has already given the matter some thought, she has not yet taken any specific steps. “Until now, I thought the subject would only become relevant once I had a permanent position. I admit I'm relatively unconcerned about my pension.” Although she worked part-time before and during her studies, she took breaks now and again to travel. “To be honest, I'm not sure whether I have any gaps in my AHV or pension fund cover. I’ve only worked part-time so far. But even if I have gaps, I always say to myself that it's not too serious at my age. After all, I will have to work and pay contributions for the next 37 years. Or even longer.”

The Swiss pension system is in financial difficulties. I don’t think the first and second pillars alone will be enough when I reach retirement age.

The financing of the AHV system is noticeably deteriorating. One possible solution being discussed by parliament is increasing the retirement age for women. Liliane is doubtful about this. “The Swiss pension system is in financial difficulties. I don’t think the first and second pillars alone will be enough when I reach retirement age.” Liliane’s parents are both retired. Whenever Liliane has financial questions, she turns to her father. He was self-employed for most of his working life. He therefore advises Liliane and her sisters not to rely exclusively on state and occupational pensions, but to save as much as possible. “As soon as I have found a permanent position, I intend to investigate the topic of pillar 3a. When I do so, I would seek professional advice.”

Liliane has often talked to friends about pension planning. When do I have to look into it? How much do I have to save? And when is a third pillar worthwhile? Liliane knows that the sooner she tackles the subject, the better.

Five expert tips for Liliane

  1. Get your maximum AHV pension. Pay any missing contributions within five years. However, this is only possible if you were insured in Switzerland during the relevant period. If you are unsure, order an AHV account statement from your compensation office so that you can check whether you are on course towards receiving a maximum pension.
  2. Part-time workers mainly suffer a reduction in pension fund benefits, as well as a drop in AHV benefits. People with a workload of less than 50 percent and a low income risk a pension gap. This makes it all the more important for a part-time employee like you to make use of the opportunities offered by pillar 3a when it comes to pension planning.
  3. As soon as you are employed and affiliated to a pension fund, you will receive your pension certificate once a year. This contains important information. You can find out how much you can use to finance your own home or how high your disability pension would be if something happened to you. So give your pension fund statement the attention it deserves.
  4. Do you want to maintain your accustomed standard of living at retirement age and save taxes now? If so, plan for retirement and save with pillar 3a. Pension income after retirement only covers around 60 percent of your last salary. In addition, gainfully employed persons with a pension fund may pay in up to 6,826 francs per year and deduct the full amount from their taxable income.
  5. The time between now and retirement is also your investment horizon for pension planning. So it’s worth investing your money the smart way. By investing your 3a savings in selected investment funds, you benefit from higher return opportunities compared to a traditional account-based solution. UBS Vitainvest retirement funds are an ideal complement to a 3a account.