Career, pensions Sabbaticals: the finance guide for your time off

Time off without financial penalties. Sabbaticals have implications, including potential pension gaps and changes in your insurance coverage. Here’s what you need to watch out for.

03 Jun 2022 7 min read

Sabbatical: Finanzieller Guide für Ihre Auszeit

                The main points in a nutshell
A sabbatical will cause gaps in all three pillars of the retirement system.
How large these gaps are will vary depending on your employment situation, salary, age and the length of the sabbatical.
Inadequate insurance coverage can also lead to financial shortfalls. You should pay particular attention to your accident, health and daily sickness benefit insurance. 

Career breaks are more common than they used to be: more and more employees are taking shorter or longer sabbaticals. Whether a four-month, round-the-world trip or a six-month study break, sabbaticals can lead to shortfalls in your pension benefits and insurance coverage. Find out here how to avoid financial gaps during a career break.

Retirement: what are the financial implications of taking a year’s sabbatical?
Insurance: what insurance will you need before you start your sabbatical?
Checklist: be prepared for your sabbatical.

Retirement: what are the financial implications of taking a year’s sabbatical?

In addition to the money needed to finance time off, a sabbatical will also impact your retirement provision. How large an impact depends on whether you retain your job or not and the length of your sabbatical.

There are basically three different scenarios with different implications for your pension.

Expand all panels

Scenario 1: you retain your job and continue to receive your salary

Scenario 2: you retain your job and take unpaid leave

Some employers are willing to grant their employees unpaid leave. This can lead to the following issues for your retirement provision.

AHV

Your pension depends on your average gross wage and the number of years you have contributed, among other factors. Avoid missing contributions wherever possible. For every missing year of contributions, your future old-age pension is reduced by around two to three percent – indefinitely.

You must still pay contributions even with a longer career break, assuming Switzerland remains your main place of residence and you are still registered there. You should therefore make sure that you continue to pay the relevant contributions.

The situation is different if you move your main place of residence abroad. You can make voluntary AHV/IV contributions, depending on whether you are registered within the EU/EFTA or in a third country. Ask your AHV compensation office whether and how you can keep your Swiss insurance. Alternatively, you can join the social insurance fund in your new country.

Pension fund

In addition to the AHV, gaps can also arise in your pension fund. The size of the gap will depend on your salary, age and the length of your sabbatical. For example, the older you are when you go on sabbatical, the higher the pension gap will be due to rising pension fund contributions.

This is because when you take unpaid leave, neither you nor your employer will be paying into the pension fund. The longer the break, the bigger the gap.

Contact your pension fund to ask whether you can make voluntary contributions during your sabbatical. If not, you can also make voluntary contributions when you get back. One positive knock-on effect of doing so is that these contributions qualify for tax relief.

Pillar 3a

The size of the gap in pillar 3a will also depend on the length of your sabbatical. If you are away for 12 months or longer and therefore receive no income on which AHV contributions are due for a whole year, you cannot open a 3a account or make 3a contributions. Existing 3a accounts can be maintained irrespective of the length of absence.

Scenario 3: you leave your job

Another factor comes into play if you quit your job: you do not know when you will return to work and start paying contributions again. There are a few more things to consider than when you take unpaid leave.

AHV

In pillar 1, the situation is the same as with unpaid leave: you must continue to pay contributions for as long as you are still registered in Switzerland.

Pension fund

Any gap in your pension fund will depend on your age and the length of absence in the same way as if you retain your job. However, you will have to transfer the capital saved in your pension fund to a vested benefits account. Do not forget to tell your pension fund where the money should be transferred. You have up to six months to do so. You must move the capital to your new employer’s pension fund when you start a new job.

You can do the following to reduce pension gaps if you leave your job: you can make voluntary contributions into the new pension fund as soon as you are back from your sabbatical and in a new job. The potential size of the contribution will be calculated by the new pension fund and mainly depends on your new salary.

Pillar 3a

You cannot make pillar 3a contributions if you do not receive earned income on which AHV contributions are due. However, you can continue to maintain a 3a account. The situation is different if you receive unemployment benefits. This benefit is considered a substitute for earned income and you are liable to pay AHV and BVG contributions on it. No further pillar 3a contributions are possible as soon as entitlement to unemployment benefit stops.

Insurance: what insurance do you need to arrange before your sabbatical?

Inadequate health, accident or daily sickness benefits insurance could lead to financial problems during your sabbatical. It is worth clarifying your situation and taking precautions.

Accident insurance

As an employee you are insured against occupational accidents and – if you work at least eight hours a week – also against non-occupational accidents. However, insurance ends 30 days after your last salary payment. If you take a sabbatical, apply for interim accident insurance with your employer’s insurance scheme to extend your coverage by up to six months. You will have to pay the premiums out of your own pocket.

Daily sickness benefits insurance

You can also extend your daily sickness benefits insurance, depending on the insurance provider. Contact the relevant institution in good time to find out more. Alternatively, you can take out travel insurance or some other form of additional insurance. Again, you will have to pay the premiums yourself.

Health insurance fund

Basic health insurance works the same way for everyone in Switzerland – irrespective of your health insurance fund. If you have an emergency (illness or accident) during your stay in an EU or EFTA country and cannot travel home, your basic insurance will pay for the costs of your medical treatment. This applies to services also covered in the relevant country.

If you are in a third country, basic insurance will pay for a maximum of double the costs that would be incurred in your canton of residence for the same treatment. Additional insurance is therefore advisable if you are in a country with high treatment costs. Such countries include Australia, Japan, Canada and the USA.

Additional insurance covers the higher costs of treatment and additional services, e.g., the costs of medical repatriation to Switzerland or rescue transport services abroad.

Clarify your insurance cover with your health insurance scheme in advance.

Checklist: be prepared for your sabbatical.

The following checklist will help you close any financial gaps in your retirement and insurance cover during an unpaid sabbatical:

Avoid missed AHV contributions; contact the compensation office and clarify the contributions you will need to pay or, if you are registered abroad, the options for making contributions.
Determine the voluntary savings contributions to your pension fund and set up a payment schedule.
If you leave your job: open a vested benefits account and transfer your retirement savings from your previous pension fund.
Clarify the continued status of your 3a account and budget for any contributions to be paid.
Apply for interim accident insurance for extended accident insurance coverage.
Extend your daily sickness benefit insurance or take out travel or supplementary insurance.
Health insurance: clarify your insurance cover abroad and extend it if necessary.

Expand your financial knowledge

Would you like to learn more about “Retirement”? Then subscribe to our “Retirement” learning path today.

Subscribe to learning path

Because a personal conversation is worth a lot

What can we do for you? We’re happy to address your concerns directly. You can contact us in the following ways:

Skip Links

Career, pensions Sabbaticals: the finance guide for your time off

The main points in a nutshell

Retirement: what are the financial implications of taking a year’s sabbatical?

AHV

Pension fund

Pillar 3a

AHV

Pension fund

Pillar 3a

Insurance: what insurance do you need to arrange before your sabbatical?

Accident insurance

Daily sickness benefits insurance

Health insurance fund

Checklist: be prepared for your sabbatical.

Expand your financial knowledge

Other articles on this topic Assets

Because a personal conversation is worth a lot

You are now on the English website

Select your domicile