Women and pension planning Will my wealth last into old age?

Early pension planning is even more important for women than for men, as they live longer and are more likely to work part-time.

by UBS Insights 18 Nov 2020

Will your pension benefits and assets be adequate for the standard of living you aspire to in old age? At first glance, this would appear to be a question that needs to be asked regardless of gender. Comprehensive pension advice, including financial planning and coordinated measures, will come up with answers unique to the individual. The reason why this is more important for women relates to specific parameters for pension planning, which are in many cases different for women than for men:

    • Higher life expectancy: On average, women aged 50 years old today will live for another 36.5 years, compared to 33.3 years for men. This difference of more than three years must be taken into account in the pension planning.
    • Workload and interruptions: Due to breaks to raise a family or working part-time, women often clock up less time at work over the course of their lives, and thus end up with a lower pension.
    • Other priorities: Women often attach greater importance to security and stability than men do.

    Your income in retirement

    Women can expect to receive Old Age and Survivors’ Insurance (AHV) and usually a pension from a pension fund in retirement. However, working part-time and career breaks can mean that you do not receive the maximum AHV and that your pension fund payment is not very high. Depending on your situation, you may receive additional income from investments and real estate.

    An insured salary of approximately CHF 60,000 is provided for in the compulsory part of the occupational pension scheme, while certain pension funds voluntarily insure higher salary sums.

    Your expenses after retirement

    Financial needs may indeed decrease in old age, but this often happens to a lesser extent than many people might assume. Even after retirement, you may need to buy a car or have your bathroom redone. Healthcare costs are generally increasing, especially if nursing care is required. Although income is lower after retirement, taxes may still remain at the same level, as the deductions no longer apply. For planning purposes, assume that when you are elderly your spending will be at least 80 percent of what it is today, or if need be exactly the same.

    Your future financial requirements can be appraised with greater precision as part of a pension consultation.

    Pension News: Special women’s issue

    Pension planning is just one of eight topics covered in this special women’s issue of Pension News. See inside for more on “marriage or cohabitation,” “pension or lump-sum withdrawal,” and how you can save on taxes.

    Closing the income gap with asset attrition

    If your calculated financial needs after retirement are higher than your income, we talk about an income gap. In order to maintain your standard of living, you have to draw upon your saved capital and gradually reduce it in the process. For the amount, the rule of thumb is that the capital saved on retirement should be 20 times the annual income gap.

    How to use the diagram: Before retirement, your gross income is CHF 80,000 per year. For the period after retirement, you have calculated a need for CHF 60,000 per year to maintain your desired standard of living. As a rule, the AHV and pension fund together cover 60 to 70 percent of your final salary, which in this case would be CHF 49,000. This means that you have an income gap of CHF 11,000 per year and should have around CHF 220,000 capital at your disposal on retirement to maintain your standard of living.

    From budgeting to long-term financial planning

    There is no blanket answer to the question of whether your assets will last into old age. Instead, you have to start by looking at your specific situation. We recommend getting transparent personal advice. Using the income and expenditure budget you have drawn up, your UBS advisor can work with you to draw up a long-term financial plan and define appropriate measures. Your assets should be structured according to your personal goals and asset investments aligned with these goals. This is particularly important if your expenses after retirement exceed your income and you need to draw on your assets.

    Contact your client advisor

    Our advisors have sound specialist knowledge of pension planning. Don’t hesitate to get in touch with them – they’ll be happy to help.