Find your way through the retirement provision jungle
The landscape of Swiss retirement provisions used to be well-organized: One path straight as an arrow took people from their apprenticeship to retirement. The sky was not the limit, but the direction was clear.
Today, the world has become more complex – you can do far more to control the course of your life and may actually have to find your very own path. At the same time, the three-pillar system of government, occupational and private retirement provisions is increasingly turning into a jungle. We'll accompany you on your journey and bring light into the depths of the jungle.
To be specific: this is how you can save for retirement
Current studies confirm: knowledge is worth more than gold
Women and retirement provision - more knowledge for equal opportunities
- Almost 80% of women grade their financial knowledge as mediocre to very poor.
- 48% of men, but only 32% of women invest their personal savings with a yield orientation.
- 61% of the full-time employed pay into pillar 3a - among the part-time employed this is only 48% although this would be especially worthwhile for them.
Fairplay
- 57% are not aware that for many people the greater part of their assets is to be found in the pension fund.
- 50% of employed people regard the contributions to the 2nd pillar as a kind of tax or fee. Why? Because they are deducted directly from the salary.
- Only 22% of people ask about this at the job interview: yet occupational retirement provision plays a major role for income in old age.
Interaction of the three pillars
What does the first pillar do?
Government retirement provision (OASI/IV/EO)
Together with the old age, surviving dependants' and disability insurance (OASI/IV), governmental retirement provision forms the first pillar in the Swiss retirement provision system. The goal of the first pillar is to protect the existence minimum for pensioners, the disabled and surviving dependants. If the benefits from OASI and IV are insufficient for existential protection, the person involved in addition receives supplementary benefits. The first pillar is financed on a pay-as-you-go basis. This means gainfully employed and employers pay monthly contributions with which current pensions are paid out.
The following are insured:
- everyone who lives and works in Switzerland
- people who work in Switzerland but live abroad
- people who live in Switzerland, but do not engage in any gainful employment (e.g. students, housewives/-men, the disabled and early pensioners)
What does the second pillar cover?
Occupational retirement provision (BVG)
Together with the first pillar, occupational retirement provision is intended to protect your standard of living in old age, disability or death. Employees and employers contribute to the second pillar, usually in equal shares (so-called equal share financing). By contrast with the first pillar, each insured party saves and earns interest on their own retirement capital – however, 56 percent of the Swiss population is unaware of this. They do not include their pension fund savings in their own assets. Yet for many people, this is the greatest portion of their assets.
All employees with an OASI annual salary of more than CHF 21,510 are subject to mandatory insurance for the risks of disability and death from January 1 after turning 17. Retirement benefits are also insured from January 1 after turning 24. The following can take out voluntary insurance: the self-employed, those with an annual salary under CHF 21,510 and those with several employers.
Redistribution in the second pillar: What does this involve?
Occupational retirement provision is the most important retirement provision pillar. But it has for long been faced with major challenges. There are three reasons for this: In the first place, people are becoming much older than in the years when occupational retirement provision was created. Secondly, a low interest rate level has existed for more than ten years, leading to the investment of retirement assets generating much lower returns. Therefore, interest as «third contribution provider» along with employees and employers is no longer fit for purpose. Thirdly, the rigid statutory requirements result in excessive guarantees – in the form of conversion rates that are too high and unrealistic interest rate promises. The consequence: A financing gap for pensions has arisen that is not so easy to close. Retirement provision institutions have to finance these with a considerable portion of the investment returns of the employed and redistribute investment earnings in favor of the retired. Find out how much this redistribution affects you and what can be done to counter it.
Can I make an early withdrawal of my retirement capital in the second pillar or top it up?
Early withdrawal of second pillar retirement capital
Your pension fund assets belong to you, but they can only be withdrawn early, i.e. before retirement, in three special cases: If you want to acquire residential property, become self-employed or leave Switzerland for good.
Purchase potential in the second pillar
Many people have contribution gaps in their retirement provision – because they studied a long time, lived abroad or took a maternity break. Many are not even aware of this. Even a salary increase also has the potential to adjust the insurance benefit to the new salary retrospectively. Those who pay in additional money can compensate for their contribution gaps, improve the retirement benefit and at the same time reduce their tax burden. This is because the purchase sum can be deducted directly from the taxable income in your tax declaration. The current purchasing potential is given in the pension certificate. Since almost all pension funds operate under the so-called defined contribution principle, purchases to increase the future retirement pension have become more important.
What potential does the third pillar have?
Personal retirement provision enables you to reduce the difference between your current and future income and close retirement provision gaps. You can deduct your contributions to pillar 3a up to a particular amount from taxable income. A life insurance not only enables you to save for retirement, but also protects against life risks such as disability and death as well as closing retirement provision gaps. Normally, you only have access to the money saved upon retirement. There are a few exceptions, such as financing self-used residential property or self-employment.
Why is the third pillar or personal retirement provision more important than ever?
Normally, the first and second pillars only allow attaining something over half the previous earnings from gainful employment. Those who want more financial freedom in old age should certainly also turn to personal retirement provision – via pillar 3a or 3b.
What life risks can I cover with the third pillar?
Those who rely exclusively on the first and second pillars are threatened by income gaps – not just in retirement, but also in the event of the life risks of disability and death.
Disability: Those with long-term illnesses or even disabled must expect clear losses, depending on the situation. These losses can be covered by personal disability insurance.
Protecting your partner or family in the event of death is also important, e.g. to enable them to continue to live in the customary location. Depending on the situation, benefits from the first and second pillar only flow to a limited extent. Life partner couples are worse off in our retirement provision system. The lump-sum death benefit from risk life insurance can then represent an important safety cushion for surviving dependants.
How can I achieve my savings goals?
Our tips:
- Take a look at your wage certificate: Your current wage certificate or pension fund certificate provides you with a lot of important information about your current retirement provision status. Our customer advisors would be glad to explain the numbers to you. This will give you a solid basis for further planning.
- Draw up a budget: Note all income and expenses per month/per year. Also deliberately financially plan for vacations, hobbies or purchases, and create reserves for the unexpected. This will tell you how much money you have left for saving.
- Plan for the future: What wishes and dreams would you still like to fulfill – and what would it cost? Saving is much easier with a clear goal in front of you.
- Benefit from retirement provision planning: Our experts would be glad to advise you free of charge and without strings.
