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Many years of caring for children or part-time work after pregnancy: Women with children often face special challenges when it comes to retirement provision. Five practical tips on how you can minimize income gaps and optimize your private and occupational retirement provision.
Numbers never lie. And when it comes to retirement provision, the picture for women still looks bleak: On average, women receive around one third less retirement from Pillar 1 (AHV) and Pillar 2 (BVG) than men. Part-time work and a lower income are to blame. The lion’s share of this so-called pension-gender gap occurs in the occupational benefits insurance. In addition, women generally also have less money, assets, and income at a private level. That’s why they are less likely to save with Pillar 3.
However, many are aware of the impending retirement income gap: Around one third of women in Switzerland are concerned about whether they will have enough money after retirement. This is confirmed by a representative survey we recently conducted among 1,000 people in Switzerland.
Regardless of whether you take a longer baby break after the birth of your child or children or decide to work part-time: This is how gaps in your retirement provision occur. This means that you will save less for your retirement and draw a lower pension later on.
You should therefore first get an overview of your previous payments into Pillars 1 and 2. For the maximum AHV pension of CHF 2,450 per month (as at 2024), you need an average annual income of at least CHF 88,200. Many people working part-time fail to achieve this level of income.
Contribution gaps have an even more detrimental effect: Every missing contribution year leads to a further pension cut of 2.3%. To avoid this, you must take the initiative yourself when you take a break from work: Voluntarily pay the minimum annual contribution of currently CHF 514 (as of 2024) into the AHV. You can request a statement of your personal AHV account from the compensation office. Payment gaps can be closed within five years by paying the minimum contribution in arrears.
Pillar 3a is available to close gaps that arise during family time. Female employees with a pension fund may pay in 20% of their annual income, up to a maximum of CHF 7,056 (as of 2024). For self-employed women, the annual payment is limited to CHF 35,280. You can deduct the amount paid in from your taxes. With Pillar 3a, you also have the option of hedging against the financial risks of incapacity to work or death.
Incidentally: You can also pay into Pillar 3 even if you are not employed – in this case into Pillar 3b.
Accidents can happen anywhere, whether at home or during leisure activities. And even a strong immune system does not protect against all illnesses. If a family member is absent, this can lead to considerable financial losses. At the same time, important household chores and care tasks are left undone.
With 911,000 registered occupational and leisure accidents (in German) in 2022, there is a statistical probability of more than 10% that you will be affected by such an event. However, there are ways to minimize these financial risks:
These types of additional coverage should always be adjusted to the income of your partner and your individual situation. It’s worthwhile to obtain personal advice.
In principle, the same coordination reduction applies to part-time employees as to full-time employees. Unless your employer has provided for a reduced coordination reduction for part-time employees in the pension fund regulations.
Let's assume that you return to your job with a part-time workload of 60%. The coordination reduction for an annual salary of CHF 80,000 (100% workload) is CHF 25,725, i.e. almost a third. With a 60% workload, it is already more than half. If the pension fund regulations provide for a reduced coordination reduction, your deduction will be adjusted to CHF 15,057. This means your insured salary is higher and you pay significantly more money into the pension fund even with a lower annual salary. The outcome is that you save more for retirement. This won't close your payment gap, but at least it won't widen it any further.
Definitely use your next job interview for part-time employment as an opportunity to discuss the issue of coordination reduction.
Source: Own depiction
The coordination reduction is a fixed deduction from the gross annual salary to determine how much income should be insured with the pension fund. This prevents overinsurance. In other words, the coordination reduction ensures that only the part of the salary that is not already covered by AHV/IV is insured. In 2024, this is CHF 25,725, which corresponds to 7/8 of the maximum AHV pension.
Example: You have a gross annual salary of CHF 80,000. After the coordination reduction, your income insured in pillar 2 is still CHF 54,275.
In times of low interest rates on savings accounts or traditional 3a accounts, it is worth investing your private retirement provision in the financial markets. This is because investment funds with a high proportion of equities offer significantly higher potential returns. Especially if you have a long investment horizon.
Example: Andrea is 41, works on a 60% basis as a marketing specialist, and earns CHF 50,000 a year. Regarding her retirement provision, she knows that she can save for around another 20 years. She plans to put aside CHF 500 every month. But what other options does she have? With a savings account and 1% interest, she would have CHF 132,830 for her retirement after 20 years. With a 3a pension solution, she benefits from a 4.2% return and saves an additional CHF 18,000 in taxes. Her capital thus grows to CHF 204,572.
The earlier you start to invest, the better your return: Women who save for another 20 years or more until retirement can achieve an additional amount of over CHF 70,000. Thanks to Pillar 3 with a securities component, pension gaps can therefore be easily reduced. And time is on your side.
Source: Own depiction
Taking plenty of time for family and children is important. But it is just as important to prevent poverty in old age at an early stage. Use your options to save in a Pillar 3a solution and a pension fund to provide for your retirement and close any income gaps. Also check what impact a securities solution would have on your retirement savings – especially if you calculate with a longer investment horizon.
Nadine Graf is a theme manager and writes texts for AXA on topics related to insurance and beyond.
