Women and pension planning Women working part-time: Beware of pension gaps

Part-time working is popular, especially among women. However, the second pillar, in particular, entails a number of disadvantages of which you should be aware.

by René Knoblauch 20 Nov 2020

In Switzerland, 59 percent of women and 18 percent of men work less than 90 percent of full-time hours. Working part-time is more popular here than in almost any other European country. However, reducing your workload has a serious impact on retirement provision, as the current pension fund regulations disadvantage people with part-time jobs. As such, women in particular should actively address the issue of pension planning at an early stage. The following 5 questions are important.

1. Will I be accepted into a pension fund?

If you want to join your employer’s pension fund, your annual gross income must be at least CHF 21,510 (as of 2021). This is the difference between the second pillar and the Old-Age and Survivors’ Insurance (AHV). If your annual salary is lower, the employer can include you in the pension fund on a voluntary basis, but is not obliged to do so.

2. How should I pay into a pension for my part-time work?

If you have several part-time jobs, first check whether your total income exceeds the aforementioned amount. Even if the individual salaries are all below the minimum income, if their sum exceeds it, you are still entitled to be admitted to a pension fund. Ideally, you should process all part-time income through the pension fund of a single employer. Whether this is actually possible will depend on the regulations of your employer’s respective pension funds.

If none of your employer’s pension funds will take you on, you can join the Stiftung Auffangeinrichtung BVG. Although the benefits offered by this pension scheme are considered relatively unattractive, this is preferable to forgoing pension contributions from your employers. For employees over 55, the employer’s contribution to the pension fund remains 9% of the insured salary.

Pension News: Special women’s issue

Working part-time 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 tax.

3. What is the coordination deduction?

The insured salary is calculated on the basis of your annual gross income less the legally defined coordination deduction of CHF 25,095 (as of 2021). A sample calculation: On a gross income of CHF 30,000, the insured salary is CHF 4,905.

There are pension funds that are more generous and adjust the coordination deduction as a percentage of the workload. If the gross salary given in the sample calculation applies to a 30 percent workload, such an adjustment would result in an insured salary of CHF 22,535. Your pension fund statement will tell you whether your pension fund reduces the coordination deduction for part-time work.

4. Where are there gaps in pension provision, and how can they be filled?

The pension benefits from AHV and the pension fund will most likely only partially cover your financial needs in old age, especially if you work less than 50 percent of full-time hours. The difference between your needs and the first- and second- pillar pension benefits is known as the pension gap. It is therefore important that female part-time workers make the most of the options offered by pillar 3a. You can deduct the annual contributions paid in from your taxable income, which means you benefit twice over.

If you belong to a pension fund, you may pay up to CHF 6,883 per year (as of 2021) into pillar 3a. The banking solutions allow you to decide on a yearly basis whether you want to opt for the maximum amount. Even a monthly standing order of over CHF 100 will start you off on the right track. Part-time employees who do not belong to a pension fund may pay up to 20 percent of their net income into pillar 3a, but no more than CHF 34,416 per year (as of 2021).

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