The Swiss economy has gone through a difficult period and the impact of the COVID-19 crisis on the labor market is obvious. The economic forecasts of the State Secretariat for Economic Affairs (SECO) and the Swiss Institute for Business Cycle Research (KOF) at ETH Zurich predict that further waves of Coronavirus could lead to an economic downturn. This will also affect the Swiss pension system, though hopefully only temporarily. What this means for you as an individual depends on your employment situation.

Your employment situation is unchanged

Thanks to a number of factors, including reduced working hours, fewer workers have lost their job than originally predicted. Despite this, there has still been a sharp rise in the number of people out of work. At the end of January 2021, 169,753 people were registered unemployed, equivalent to an unemployment rate of 3.7% and an increase of 40.3% compared to the same month in 2020.

Fewer people in employment means lower receipts for the Federal Old Age and Survivors' Insurance scheme (AHV, pillar 1). And since higher levels of unemployment also result in people spending less, AHV VAT receipts will also be lower.

The biggest challenge for pillar 2 is the aging population, with younger employees having to contribute more to pay the pensions of those already retired. Prolonged periods of low interest rates also mean the coverage ratios of pension funds remain under pressure, as it is difficult to generate good returns.

For those whose employment situation is unchanged, the above developments make higher AHV and pension fund contributions more likely. For pillar 2, there is a higher risk that the conversion rate will need to be lowered and the retirement age increased. Further details can be found in the table below.  

Maintain your standard of living in retirement with our 3a solutions

Even without COVID-19, benefits from the AHV and the state pension fund are usually not enough to maintain your current standard of living in retirement. UBS offers two pillar 3a solutions with which to close any gaps in your retirement savings: one pillar 3a account with a fixed interest rate and one pillar 3a custody account that allows you to benefit from growth on the financial markets, including sustainable investment opportunities.

Reduced working hours

Reduced working hours do not impact retirement benefits directly. Even if salaries are temporarily reduced, contributions to the AHV and the pension fund remain unchanged. Thus the potential impact on those working fewer hours is the same as for those who still work full time.

COVID-19 and retirement savings: possible impact and recommended measures

Pillar 1 – AHV

  • higher retirement age
  • higher contributions
  • lower pensions with lower wages

Pillar 2 – pension fund

  • lower interest paid on savings
  • lower conversion rate
  • higher contributions
  • higher retirement age

  • detrimental impact with limited room for maneuver

Pillar 3 – 3a private retirement savings

  • maximize your retirement savings by paying in the maximum amount
  • better opportunities to grow your wealth with securities
  • pay regularly into a custody account for optimum risk mitigation

  • voluntary means of improving your personal retirement situation

For the unemployed

Those who have lost their job due to COVID-19 can expect this to impact their retirement benefits, depending on how quickly they find another job. Here are six ways to alleviate some or all of the impact:

  • Depending on your canton, you should register with your municipality or the Regional Employment Center (RAV) as soon as possible to avoid receiving less unemployment benefit than you would otherwise be due.
  • If you receive a daily allowance from unemployment insurance, you will continue to pay AHV contributions and are insured against death and disability. However, you will no longer pay into pillar 2 because you are no longer insured through your former employer's pension fund.
  • You can transfer your existing retirement savings to a maximum of two vested benefits accounts at different institutions. If you have two accounts, you can reduce the amount of tax you pay by withdrawing these savings in different years. For information on vested benefits solutions at UBS, go to
  • You can continue to pay into pillar 2 voluntarily while you are unemployed. To do so, you must submit an application to the Substitute Occupational Benefit Institution within 90 days of leaving the pension fund.
  • Since 1 January 2021, those aged 58 and over can now stay insured with their current pension fund.
  • If you receive unemployment benefits, you can continue to pay in the maximum annual amount into pillar 3a (2023: CHF 7,056) and deduct it from your taxes.

Private retirement savings are more important than ever

Although the COVID-19 crisis does not present a fundamentally new challenge to Switzerland's pension system, it does reinforce its structural weaknesses and thus increases the need for much-discussed reform. However, until measures are agreed and take effect, private retirement savings offer you the opportunity to maintain your current standard of living. Your client advisor will be happy to answer your questions about your personal retirement situation.