What does our expert say? Part-time work and your pension

“What impact does part-time work have on retirement?” Pensions expert Jackie Bauer answers your questions.

24 Nov 2022 6 min read
Providing for the future means thinking about tomorrow today. Big decisions in life should not only be made for the short term, but also the long term.

In Switzerland, part-time work has long been popular, as has the view that “part-time work is a women’s issue.” FSO statistics confirm this: almost 60 percent of employed women, compared to 20 percent of men, work less than 90 percent of full-time. The number of hours you work has a significant impact on how much you earn and on your financial situation throughout your working life – but also during your retirement.

The pension system is gender neutral

The state pension system, i.e., pillar 1 or OASI, is designed to secure basic income. As it is financed on a pay-as-you-go basis, i.e., the current generation of workers pays to finance the pension benefits of retirees, it accommodates interruptions in employment for the purpose of raising and educating children. After all, we will only be able to sustain the financing pensions if we have enough descendants. The OASI also leans heavily on the traditional model of the single-earner household.

For example, pillar 1 grants a majority of married couples the maximum pension if one of the partners meets the requirements, even if the other partner has worked little or not at all. Since the number of children financing OASI pensions in their later working years is declining, the state pension model will need to be reformed in the future and require higher contributions from those who are still working. A step in this direction was the OASI 21 reform in September 2022, which raised women’s retirement age. You can read the details of the reform in our article “OASI 21 accepted – much remains to be done.

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In the case of pillar 2, the occupational pension (BV), we are all compelled to set aside a portion of our earned income for later. “You are what you eat,” as the saying goes. In the case of the occupational pension, one could say: “what you make is what you get.” Earned income and the benefits offered by your employer are directly relevant to the amount you save for retirement. A lower workload matters, if only because you will earn less income. Another complication is the fact that the law stipulates that the threshold for entering the occupational pension plan is a minimum earned income of CHF 22,050 per year (last update: 2023); lower incomes need not be taken into account. Furthermore, the “coordination offset” combines the coverage provided by OASI and BV (last update 2023: CHF 25,725).

’What you make is what you get.’ The earned income and benefits offered by your employer are directly relevant to your retirement assets.

The intention is to avoid duplicating insurance coverage, i.e., not insuring the portion of income in pillar 2 that is already covered in pillar 1. But the consequence is that many people who earn low incomes are completely or partially excluded from occupational pensions. Even so, it is also clear that it is not only due to the pension system that we see statistical differences in retirements savings between socioeconomic groups, but also due to social and traditional models of family and work.

Think long-term

Motives for part-time work are many and varied. Those who choose this type of work should do so consciously and consider not only the short-term but also the long-term effects. In the short term, the argument that state childcare is hard to come by and private childcare is very expensive may be compelling. Either constraints on time are not compatible with a job or – bottom line – there simply is (too) little left in the wallet at the end of the month. In the long run, however, the amounts paid to pension plans are often forgotten – not only your own, but also those paid by your employer. Besides, it is important to avoid longer interruptions in employment as far as possible or to undergo further vocational training to maintain lifelong opportunities in the labor market.

If we look to the future and take foreseeable trends into account, it becomes clear: part-time work is not only a women’s issue. Although fewer women are working full-time today than did ten years ago, they are having fewer children on average. And while only ten percent of men worked part-time a decade ago, the figure is almost twice that today. This is due in part to the fact that partners are sharing professional and household work more equally. At the same time, the view among younger people is that there is more to life than work. Young people are taking longer or recurring periods of time off, they are taking longer to complete their education, or working a shorter week. Part-time work has also increased among older people, even past the official retirement age. This means the gap mentioned at the beginning, which statistics show exists between men and women, and which is largely due to different workloads, should narrow over time.

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This means that saving for retirement has become an important issue for everyone. Providing for the future means thinking about tomorrow today. Major decisions in life should not only be made for the short term, but also the long term. Drawing up a budget can help you to distinguish between essential and potentially dispensable expenses. You should become familiar with the pension system and request an advance calculation of the OASI and pension fund savings in order to compare expenses and income. In this way, you can consciously decide: how much do you need for a happy life, both today and tomorrow, and how do you best allocate these resources? Then, well-prepared and with a clear conscience, you can work less and leave statistics to take care of themselves.

Jackie Bauer is an economist and pensions expert at UBS and heads the Retirement Research division at the Chief Investment Office. Jackie regularly lectures on current and future changes in the Swiss pension system and what they mean for private and institutional investors. She studied economics at the University of Zurich and has been working at UBS since 2013.

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